CBDT signs 125 Advance Pricing Agreements with businesses to avoid tax disputes
- In Reports
- 11:35 PM, Apr 16, 2024
- Myind Staff
The Central Board of Direct Taxes (CBDT) has forged a historic 125 Advance Pricing Agreements (APAs) during the fiscal year 2023-24 with taxpayers, aimed at circumventing audits of their international transactions, provided they adhere to specific conditions. Out of these, 86 are Unilateral APAs (UAPAs) and 39 are Bilateral APAs (BAPAs), as per a statement released by the CBDT on Tuesday.
This is the highest-ever APA signings in any financial year since the launch of the APA programme. The number of APAs signed in FY 2023-24 also represents a 31% increase compared to the 95 APAs signed during the preceding financial year. With this, the total number of APAs since the inception of the APA programme has gone up to 641, comprising 506 UAPAs and 135 BAPAs.
The APA Scheme aims to offer assurance to taxpayers regarding transfer pricing by outlining pricing methods and establishing the arm’s length price for international transactions in advance, covering up to five years ahead.
Moreover, taxpayers have the opportunity to apply the APA retrospectively for the four previous years, extending tax certainty to a total of nine years. Signing bilateral APAs also shields taxpayers from potential or existing double taxation. In the initial operational year of 2013-14, during which APAs became effective in August 2012, only five agreements were inked by the CBDT.
FY24 also witnessed the maximum number of bilateral deals in any financial year till date. These were signed as a result of entering into mutual agreements with India’s treaty partners such as Australia, Canada, Denmark, Japan, Singapore, the UK, and the US, the tax authority said.
Historically, multinational corporations' cross-border transactions have often sparked numerous disputes with tax authorities, who scrutinise the value of these transactions, particularly the 'transfer price', when it deviates from industry norms.
Bilateral APAs play a crucial role in mitigating transfer pricing disputes arising from international transactions between affiliated companies situated in both countries. Additionally, they provide assurance and predictability for such international transactions between related companies of the two nations.
"The APA programme has contributed significantly to the Government of India’s mission of promoting ease of doing business, especially for MNEs which have a large number of cross-border transactions within their group entities. CBDT appreciates the taxpayers for their cooperative attitude and for being equal partners in this programme," CBDT said in the note.
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