Transfer Pricing Alert
Transfer Pricing Alert
CBDT signed a record number of 125 Advance Pricing Agreements in a single year ended on March 2024
The Indian Advance Pricing Agreement (APA) programme has completed nearly 12 years since it was launched in the year 2012. Over the years, APAs have emerged as a leading tool for multinational enterprises to achieve tax certainty in India.
The Ministry of Finance has recently issued a Press Release1 wherein it announced that during the fiscal year 2023-24, the Central Board of Direct Taxes (CBDT) has entered into a record 125 Advance Pricing Agreements (APAs) with the Indian taxpayers, which includes 86 Unilateral APAs (UAPAs2) and 39 Bilateral APAs (BAPAs3).
This marks the highest-ever APA signings in any fiscal year since the launch of the APA programme in India, which represents a 31% increase compared to the last year when a total of 95 APAs were signed in the preceding fiscal year.
With the closure of yet another successful year for APA signings, the total number of concluded APAs in India since the inception of the APA programme has gone up to 641, comprising 506 UAPAs and 135 BAPAs.
The signing of 39 BAPAs in a year is also the maximum number of BAPAs, India has signed in any single year. This is a testimony of India’s efforts towards negotiations and entering into mutual agreements with India's treaty partners namely Australia, Canada, Denmark, Japan, Singapore, the UK and the US.
The APA Scheme endeavours 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 a maximum of five future years. Moreover, the taxpayer has the option to rollback the APA for four preceding years, as a result of which, tax certainty can be achieved for nine years at one go.
BDO in India Comments
These APA signings demonstrate a credible example of how Indian Tax Authorities and taxpayers have collaborated to find solutions to the vexing transfer pricing disputes. It is important to sustain this momentum as it creates a win-win for all stakeholders and fosters certainty. Year-on-year growth in the number of APAs signed every year bears testimony to the fact that the Indian APA program has grown and evolved leaps and bounds over the years since its inception.
1 Press Release dated 16 April 2024
2 UAPA, is an agreement to determine transfer pricing methodology for Taxpayer’s international related party transactions that involves only the Taxpayer and the Tax Authority of the country where the Taxpayer is located.
3 BAPA, is an agreement to determine transfer pricing methodology for Taxpayer’s international related party transactions that involves the Taxpayer, Taxpayer’s Associated Enterprise, and Tax Authorities of both the countries.