CA Jinesh Bhagdev
CBDT Explains APA through a press release. Indian APA Scheme Notifies Three Types of APA unilateral, bilateral and multilateral. Press Release clarifies that the choice is on the applicant to choose a particular type of APA at the time of making the application. Unilateral APA is an agreement between the Board and the applicant and this process does not involve any agreement with the treaty partner. In bilateral and multilateral APA request, the applicant is required to make an application with the Competent Authority of India as well as the Competent Authority of the other country. Further explaining the benefits of APAs, the press release clarifies that APAs will provide tax certainty with regard to determination of arm’s length price of the international transaction with respect to which the APA has been entered into, reduce the risk of potential double taxation through bilateral or multilateral APA, reduce compliance cost by eliminating the risk of transfer pricing audit and resolving long drawn and time consuming litigation and other dispute resolution process and alleviate the burden of record keeping as the taxpayer knows in advance the required documentation to be maintained to substantiate the agreed terms and conditions of the agreement.
However the major area of concern for the Multinational Companies is the Hefty Fees for making an application under an APA. We will have to wait and watch as the scheme progress and how competent are Indian Tax Authorities to come to an understanding with the Competent Authorities of the other countries.
CBDT Press Release & Notification in respect of above can be viewed at the following links : –
Ministry of Finance Notifies Advance Price Agreement (APA) Scheme
Notification No. 36/2012 dated 30-8-2012
The Author is a specialist in transfer pricing and can be Contacted at Jinesh@jbhagdev.com
