Tax Regime: CBDT signs 20 unilateral agreements with Indian tax payers

In a move to foster a non-adversarial tax regime, the  Central Board of Direct Taxes (CBDT) entered into 20 unilateral advance pricing agreements (APAs). 

The agreement procedure took place for two days on August 29, 2016 and August 30, 2016 with Indian tax payers. 

"Many of these agreements also have a "rollback" provision in them, the statement said. 

The 20 APAs signed includes varipous sectors of the economy such as Information Technology, Banking & Finance, Insurance, Human Resources, Pharmaceutical, Solar Energy, Oil & Gas, Foods & Beverages, Telecommunications and NGO.

While international transactions covered in these agreements include Software Development Services, IT enabled services, Investment Advisory Services, KPO services, Contract manufacture, Contract R&D services, Import of components, Support services, Export of goods, Management services, Brand Royalty, Technical services, Engineering design services, Selling & Marketing services, Network operation & maintenance services, General & Administration services, HR consultancy services, etc.

Further, taxpayer has the option to rollback the APA for four preceding years. 

After this 20 unilateral APAs the total number of APAs entered into by the CBDT has reached 98, which includes 4 bilateral APAs and 94 unilateral APAs. 

During the first five months of the current fiscal year, a total of 33 unilateral APAs and 1 bilateral APA have already been concluded compared to 55 in Financial Year 2015-16. 

The APA Scheme was introduced in the Income-tax Act in 2012 and the rollback provisions were introduced in 2014. 

The scheme is featured  to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and determining the arm’s length price of international transactions in advance for the maximum of five future years. 

Since its development, the APA scheme have attracted more of Multi National Enterprises (MNEs) and that has registered above 700 applications in both unilateral and bilateral in just four years. 

The approach and functioning of the officers in the APA teams have been appreciated and acknowledged by the industry in India and abroad.