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CBDT inks APAs with two MNCs which includes first APA with Rollback Provision

APAs with two MNCs

Press Release

New Delhi, 6th August, 2015

As a part of a major initiative to usher in certainty in taxation, the Central Board of Direct Taxes (CBDT)  entered  into  two  unilateral  Advance  Pricing  Agreements  (APAs)  on  3  August,  2015 with  two  Multi-National  Companies  (MNCs)  which  includes  the  first  APA  with  a  “Rollback” provision. With this, the CBDT has so far signed 14 APAs of which 13 are unilateral APAs and one is a bilateral APA. The 14 APAs signed relate to various sectors like telecommunication, oil exploration, pharmaceuticals, finance/banking, software development services and ITeS (BPOs).

Unilateral APAs are agreed between Indian taxpayers and the CBDT, without involvement of the tax  authorities  of  the  country  where  the  associated  enterprise  is  based.  Bilateral  APAs  include agreements  between  the  tax  authorities  of  the  two  countries.  An  APA  with  the  “Rollback” provision  extends  tax  certainty  for  nine  financial  years  as  against  five  years  in  APAs  without “Rollback”.

APAs  settle  transfer  prices  and  the  methods  of  setting  prices  of  international  transactions  in advance.  The  Government  is  committed  to  conclude  a  large  number  of  APAs  to  foster  an environment  of  tax  cooperation  and  certainty.  Currently  a  number  of  unilateral  as  well  as bilateral  APAs  with  Competent  Authorities  of  UK,  Japan  etc  are  at  advanced  stage  of negotiations.

A  Framework  Agreement was recently signed with United States under the Mutual Agreement Procedure  (MAP)  provision  of  the  India-US  Double  Taxation  Avoidance  Convention  (DTAC). This is a major positive development. About 200 past transfer pricing disputes between the two countries  in  Information  Technology  (Software  Development)  Services  [ITS]  and  Information Technology enabled Services [ITeS] segments are expected to be resolved under this Agreement during the current year. So far, 35 disputes have been resolved and another 100 are likely to be resolved in the next three months.

The  Framework  Agreement  with  the  US  opens  the  door  for  signing  of  bilateral  APA  with  the US. The MAP programs with other countries like Japan and UK are also progressing very well with  regular  meetings  and  resolution  of  past  disputes.  These  initiatives  will  go  a  long  way  in providing stable tax environment to foreign investors doing business in India.

Also Read: Anti Dumping Duty on Glass Fiber and Articles thereof Imported from China

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