CBDT Signs 1st Bilateral APA With Japan!
The CBDT has signed its first bilateral advance pricing agreement or APA with Japan. The APA regime was introduced in 2012 and it allows taxpayers and tax authorities to determine in advance, an appropriate transfer pricing methodology for a given set of transactions. Payaswini Upadhyay has the exclusive details.
The CBDT has signed its first APA within 1.5 years which I am told is commendable. Now we don’t know the name of the company with whom the APA has been signed because that is confidential information but what we do know is that it’s a Japanese trading company. We also know that the agreements have been signed at 3 levels under this Bilateral APA with Japan. The first agreement is between the Competent Authorities of India & Japan. The second agreement is between CBDT & the Japanese company in India. And the third agreement is between the Japanese tax authority & the group company in Japan. Now, this Bilateral APA is important for two reasons- one, it reduces the transfer pricing litigation as it indicates consensus between the tax department and the taxpayer on the arm’s length price for that particular international transaction. And two, it reduces the risk of potential double taxation. So, all in all, heartening news for taxpayers that the CBDT is moving efficiently and fast on its APA regime.