CBDT APAs with MNCs: Highlights

CBDT APAs with MNCs: Highlights

Question: Foreign commerce has received a boost following the signing of unilateral APAs between CBDT and two MNCs. Elaborate.

- Central Board of Direct Taxes has signed two unilateral Advance Pricing Agreements with MNCs

- Aim of APAs is to ensure certainty in taxation for users

- This includes for the first time, an APA with Rollback provision implies extension of tax certainty for 9 financial years as against 5 years in APAs without Rollback

- CBDT has signed 14 APAs of which one is bilateral and 13 are unilateral

- 14 APAs relate to numerous sectors such as telecom, oil exploration, finance/banking, pharmaceuticals, software development services and ITeS

- CBDT has signed two APAs with US companies to overcome transfer pricing issues

About APAs

- APAs or advanced pricing agreements are meant for settling transfer prices and setting prices of global transactions in advance

- Unilateral and bilateral APAs are the two types

- APA with a rollback provision extends tax certainty for 9 financial years as against 5 in regular APAs

- Rollback APAs have agreements up to 5 forward years and 4 past years

Facts and Stats

- Unilateral APAs are those agreements which are agreed to between CBDT and Indian taxpayers

- This involves tax authorities of the nation where the associated enterprise is based

- Bilateral APAs are those which imply agreements between tax authorities of two nations

- Board is negotiating for conclusion of agreements with Japanese and UK companies as well

- Close to 200 past transferring price disputes between the two nations in software and infotech enabled services are to be resolved by the framework agreement with the US under mutual agreement procedure provision of DTAC

- Transfer pricing has been a significant dispute between tax authorities and MNCs

- Transfer pricing in Cairn and Nokia has created considerable tension in India