This article is about Advance Pricing Agreements (APA) provisions. Mainly it will cover the basic meaning of Advance Pricing Agreement, types of Advance Pricing Agreement, objectives of Advance Pricing Agreement and number of Advance Pricing Agreement signed by India.
According to Indian Tax Laws, it is an agreement between the Central Board of Direct Taxes (CBDT) and any person, which determines, in advance, the arm’s length price or specifies the manner of the determination of arm’s length price (or both), in relation to an international transaction.
The Organization for Economic Co-operation and Development (OECD) in its transfer pricing guidelines, defines an APAs in the following words –
“An arrangement that determines, in advance of controlled transactions, an appropriate set of criteria for the determination of the transfer pricing for those transactions over a fixed period of time”.
Once an APA has been entered into with respect to an international transaction, the arm’s length price with respect to that international transaction, for the period specified in the APA, will be determined only in accordance with the APA.
APAs can be applied for various international transactions:
It means an agreement between the Board and the applicant, subsequent to, and based on, any agreement referred to in rule 44GA between the competent authority in India with the competent authority in the other country regarding the most appropriate transfer pricing method or the arms’ length price.
It means an agreement between the Board and the applicant, subsequent to, and based on, any agreement referred to in rule 44GA between the competent authority in India with the competent authorities in the other countries regarding the most appropriate transfer pricing method or the arms’ length price
It means an agreement between the Board and the applicant which is neither a bilateral nor multilateral agreement
Any person who has satisfied the following conditions will be eligible to apply for APA as per Rule 10G:
(i) He has undertaken an international transaction or
(ii) He is contemplating to undertake an international transaction
(i) The scope of the agreement;
(ii) Identify transfer pricing issues;
(iii) The suitability of international transaction for the agreement;
(iv) Broad terms of the agreement.
(i) Not bind the Board or the person to enter into an agreement or initiate the agreement process
(ii) Not be deemed to mean that the person has applied for entering into an agreement.
(a) on the person in whose case, and in respect of the transaction in relation to which, the agreement has been entered into and
(b) on the Principal Commissioner or Commissioner, and the income-tax authorities subordinate to him, in respect of the said person and the said transaction.
The Central Board of Direct Taxes (CBDT) entered into 300th Advance Pricing Agreements (APAs) with Indian taxpayers in the month of September, 2019. Some of the APAs signed had rollback provisions also.
The 300th APAs signed in the month of September, 2019 pertain to diverse sectors of the economy.
|No. of Advance Pricing Agreements signed|
|S. No||Financial Year||Unilateral APAs
|7.||2019-20 (Till September, 2019)||27||2||29|
The CBDT expects more APAs to be signed in the near future.
(Republished with Amendments)