These three APAs cover international transactions in the
nature of payment of intra-group service charges and pertain to the telecom
industry. They also have a roll-back provision.
The Central Board of Direct Taxes (CBDT) signed three
Bilateral Advance Pricing Agreements (APAs) with the Competent Authority of
United Kingdom (UK) to reduce tax litigation. Earlier both countries had
exchanged mutual agreements amongst them under the Mutual Agreement Procedure
(MAP) Article of the India-UK Double Taxation Avoidance Convention (DTAC). With
this, CBDT so far has entered into 111 APAs.
What is Advance Pricing Agreement (APA)
Programme?
The APA Programme was introduced by Finance Act, 2012
with a view to provide a predictable and non-adversarial tax regime and to reduce
litigation in Indian transfer pricing arena. Rollback of APAs was announced in
the Budget in July 2014. An APA is usually signed between taxpayer and central
tax authority on an appropriating transfer pricing methodology for determining
the value of assets and taxes on intra-group overseas transactions. An APA can
be entered into for a maximum of 5 years at a time.
It seeks to introduce certainty in tax law by reducing
compliance costs and make tax regime investment friendly. It provides certainty
to taxpayers regarding transfer pricing that aim to avoid disputes between
taxpayer and tax regulator.
What are benefits of APAs?
Boost to economy and ease of doing business. Provide
alternative path to the investors with rollback provision to reduce litigation Strengthen
Government’s mission of fostering a non-adversarial tax regime.
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