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18 Advance Pricing Agreements signed in March: CBDT
- The Central Board of Direct Taxes (CBDT) has entered into 18 Advance Pricing Agreement(APAs) in the month of March 2019 which includes 3 Bilateral APAs(BAPAs).With this, the total number of APAs entered into by the CBDT as of now stands at 271,which also includes 31 BAPAs.
- APA allows the taxpayer and the tax authority to avoid future transfer pricing disputes by entering into a prospective agreement. An APA is a contract usually for multiple years between a taxpayer and at least one tax authority specifying the pricing method that the taxpayer will apply to its related-company transactions.
- These programmes are designed to help taxpayers voluntarily resolve actual or potential transfer pricing disputes in a proactive, cooperative manner as an alternative to the traditional examination process.
- An APA can be unilateral, bilateral, or multilateral (a)Unilateral APA: An APA that involves only the taxpayer and the tax authority of the country where the taxpayer is located (b)Bilateral APA (BAPA):an APA that involves the taxpayer, associated enterprise (AE) of the taxpayer in the foreign country, tax authority of the country where the taxpayer is located, and the foreign tax authority and (c)Multilateral APA (MAPA): an APA that involves the taxpayer, two or more AEs of the taxpayer in different foreign countries, tax authority of the country where the taxpayer is located, and the tax authorities of AEs.
- APAs gives certainty to taxpayers, reduce disputes, enhance tax revenues and make the country an attractive destination for foreign investments. These agreements would be binding on both the taxpayer as well as the government. Similarly, they lowers complaints and litigation costs.
- CBDT is a statutory authority that functions under the Central Board of Revenue Act,1963.It is a part of the Department of Revenue in the Ministry of Finance. It provides inputs for policy and planning of direct taxes in India and is also responsible for the administration of direct tax laws through the Income Tax Department.
