India expected to ink 40 Advance Pricing Agreements before end of fiscal

India is expected to ink upto 40 Advance Pricing Agreements before the end of fiscal as the country looks to provide tax certainty to foreign investors.

“The new momentum will go a long way in avoiding disputes,” a finance ministry statement said on Friday.

As many as 22 APAs have already been inked so far during the year, it said.

An advance pricing agreement is a deal negotiated between an entity and tax authorities that sets out beforehand the method of determining transfer pricing, or the value of transactions that take place between a foreign company and its subsidiary in the country.

This relates to the pricing of assets – tangible and intangible – services and funds that are transferred within an organisation in a cross-border transaction.

The Central Board of Direct Taxes has recently entered into eleven APAs with Indian subsidiaries for foreign companies operating in various segments sectros like investment advisory services, IT enabled services, cargo handling support services.

While seven of these APAs have rollback provisions contained in them, the other four are agreements for the future five years.

APAs with rollback provisions can cover a maximum period of nine years in total. With this, the CBDT has so far entered into 31 APAs

The APA programme was introduced in 2012 vide the Finance Act, 2012. In the first three years of the programme, a total of about 580 applications have been received from taxpayers.

While CBDT concluded five (5) APAs within the first year, a further four (4) APAs got signed in the second year. This year has already witnessed a dramatic increase
with the conclusion of 22 APAs.