CBDT signs first rollback advance pricing agreement
The Central Board of Direct Taxes (CBDT) signed first rollback unilateral advance pricing agreement (APA) on Monday, four months after the rollback norms were notified in March this year.
According to sources, the rollback deal was signed with a US firm for nine years, which includes protection against litigation for the past four years as well. “This will be followed by many more in the coming months with an aim to make tax regime more investor friendly,” said a government official.
“With the conclusion of this APA, it will become clear to multinational companies (MNCs) in India that they can achieve certainty around transfer-pricing for a nine-year period,” said S P Singh, senior director, Deloitte in India.
He added certainty in tax law reduces compliance costs and makes tax regime investor-friendly.
“APAs provide tax certainty and improve investment climate in the country; this one will give a boost to the Indian economy,” he noted.
With this agreement, many international companies are likely to adopt the APA route to reduce litigation, Singh added. According to sources, 30-40 APAs, mostly rollback, are expected to be signed by the year-end.
APA is an ahead-of-time agreement between a taxpayer and a taxing authority on an appropriate transfer-pricing methodology for some set of transactions over a fixed period of time.
While under the APA introduced in 2012, companies could enter into an agreement with tax authorities for the next five years, the roll-back norms give protection for the previous four years as well – a total of nine years.
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