In News
- The Central Board of Direct Taxes (CBDT) has entered into a record 95 Advance Pricing Agreements (APAs) in FY 2022-23 with Indian taxpayers.
- This includes 63 Unilateral APAs (UAPAs) and 32 Bilateral APAs (BAPAs).
About
- This year, CBDT recorded the highest ever APA signings in any financial year since the launch of the APA programme. This year, CBDT also signed the maximum number of BAPAs in any financial year till date.
- The BAPAs were signed as a consequence of entering into Mutual Agreements with India’s treaty partners namely Finland, the UK, the US, Denmark, Singapore, and Japan.
Advance Pricing Agreement (APA)
- An APA is an agreement between a taxpayer and tax authority determining the transfer pricing methodology for pricing the tax payer’s international transactions for future years.
- The methodology is to be applied for a certain period of time based on the fulfillment of certain terms and conditions (called critical assumptions).
- Advance Pricing Agreement (APA) provisions were introduced in the Income-tax Act, 1961 (Act) w.e.f. 1 July 2012.
Different types of APAs
- An APA can be unilateral, bilateral, or multilateral.
- Unilateral APA: A unilateral APA involves only the taxpayer and the tax authority of the country where the taxpayer is located.
- Bilateral APA (BAPA): It involves the taxpayer, associated enterprise (AE) of the taxpayer in the foreign country, tax authority of the country where the taxpayer is located, and the foreign tax authority.
- Multilateral APA (MAPA): an APA that involves the taxpayer, two or more AEs of the taxpayer in different foreign countries, tax authority of the country where the taxpayer is located, and the tax authorities of AEs.
Benefits
- 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.
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Central Board of Direct Taxes (CBDT)
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Source: PIB
