The Central Board of Direct Taxes (CBDT) had recently entered into 26 advance pricing agreements (APAs) in the first 5 months of the current financial year. The CBDT stated in a statement that by means of the signing of these APAs, the number of APAs entered into through the CBDT as of now stands at 297, which consist of 32 Bilateral Advance Pricing Agreements (BAPAs).
Out of these 26 APAs, one is a bilateral agreement (BAPA) entered into with the United Kingdom authorities; however, the remaining 25 are unilateral advance pricing agreements (UAPAs).
The Bilateral Advance Pricing Agreements (BAPA) BAPA and Unilateral Advance Pricing Agreement (UAPA) has entered into during this period pertaining towards various sectors as well as sub-sectors of the economy like banking, pharmaceutical, semiconductor, power, hydrocarbon, publishing, automobile, information technology, etc.
The sectors covered under these 26 advance pricing agreements, inter alia, consist of the following:
• contract manufacturing.
• provision of software development services.
• back office engineering support service.
• provision of back-office (ITeS) support services.
• provision of marketing support services.
• payment of royalty for the usage of technology as well as the brand.
• trading and distribution.
• payment of charter charges.
• corporate guarantee.
• intra-group services.
• interest in financial instruments.
The CBDT stated in a statement that the progress of the APA scheme has strengthened the government's resolve to fostering a non-adversarial tax regime.
The Indian APA program was appreciated nationally and internationally for being able towards addressing complex transfer pricing concerns in a rational as well as transparent way.
What is an advance pricing agreement
An advance pricing agreement could be referred to as a contract made between the CBDT and any other organization or individual.
It decides in advance, the arm’s length price or specifies the manner by means of which the price shall be decided for an international transaction. Also, these prices shall be valid for the period stated in the advance pricing agreement.
This procedure is completely voluntary in nature as well as is intended at supplementing appeals and any other dispute resolutions measures provided under the double taxation avoidance agreement (DTAA) for determining the transfer pricing concerns.
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