News:The Central Board of Direct Taxes (CBDT) has entered into 26 Advance Pricing Agreements(APAs) in the first 5 months of the financial year (April to August,2019).
Facts:
About Advance Pricing Agreements(APAs):
- APA is an agreement between a taxpayer and tax authority determining the transfer pricing methodology for pricing the taxpayer’s international transactions for future years.
- APA help taxpayers to voluntarily resolve actual or potential transfer pricing disputes in a proactive,cooperative manner as an alternative to the traditional examination process.
Types of APAs:
- Unilateral APA involves only the taxpayer and the tax authority of the country where the taxpayer is located.
- Bilateral APA (BAPA) 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) 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.
Importance of APAs
- APAs gives (a)certainty to taxpayers (b)reduce disputes (c)enhance tax revenues and (d)make the country an attractive destination for foreign investments.
- These agreements would also lowers complaints and litigation costs as they would be binding on both the taxpayer as well as the government.
Additional information:
About Central Board of Direct Taxes(CBDT):
- CBDT is a statutory authority that functions under the Central Board of Revenue Act,1963.It is a part of the Department of Revenue in the Ministry of Finance.
- CBDT provides inputs for policy and planning of direct taxes in India and is also responsible for the administration of direct tax laws through the Income Tax Department.
