THE
Central Board of Direct Taxes signed 11 unilateral APAs on 28 th March,
2016. With this signing, India has entered into 59 bilateral and/or
unilateral APAs. The Advance Pricing Agreement (APA) programme was
introduced by the Finance Act, 2012 to provide a predictable and
non-adversarial tax regime and to reduce litigation in the Indian
transfer pricing regime. 50 of these agreements have been signed in the
current financial year. The agreements cover a range of international
transactions, including corporate guarantees, royalty, software
development services, IT enabled services and trading. The agreements
pertain to different industrial sectors like telecom, media,
automobiles, IT services, etc. Some of the agreements have rollback
provisions and provide certainty to the taxpayers for 9 years with
regard to the covered international transactions.
Rollback
provisions in APAs were introduced in the July 2014 Budget to provide
certainty on the pricing of international transactions for 4 years
(rollback years) preceding the first year from which APA becomes
applicable. With the notification of Rollback rules in March 2015, the
taxpayer has been provided the option to choose certainty in transfer
pricing matters with the Government for a total of nine years (5 future
years and 4 prior years).
Since
the notification of the APA scheme on 30.08.2012, a pproximately 580
applications for APAs have been received and about half of these contain
a request for the Rollback provisions. The number of applications is
indicative of the wide international and national appreciation of the
India's APA programme's ability to address complex transfer pricing
issues in a fair and transparent manner.
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