Government signs 11 unilateral Advance Pricing Agreements

The Central Board of Direct Taxes signed 11 unilateral Advance Pricing Agreements (APAs) on Mar 28. With this signing, India has entered into 59 bilateral and/or unilateral APAs. The 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).