CBDT enters into a record 95 Advance Pricing Agreement

Make PDF

Key updates-

• Out of 95, 63 agreements are Unilateral APAs (UAPAs), and the remaining 32 are Bilateral APAs (BAPAs). 
• As a result, the total number of APAs has now increased to 516 since the initiation of the APA programme.  Out of these, 420 are UAPAs, and 96 are BAPAs.
• In 2023, CBDT recorded the highest ever APA signings in any financial year since the launch of the APA programme, signing a total of 95 APAs. 
• The BAPAs were signed as a consequence of entering into Mutual Agreements with India’s treaty partners namely Finland, the UK, the US, Denmark, Singapore, and Japan. 
• A record of the largest number of single day signings in the history of the programme was also created with a total of 21 APAs signed on March 24, 2023.

What are Advance Pricing Agreements(APA)?

• An advance pricing agreement is an ahead-of-time agreement between a taxpayer and a tax authority on an appropriate transfer pricing methodology for a set of transactions at issue over a fixed period of time.
• The Government has introduced the APA Scheme through Finance Act, 2012 and Income Tax (Tenth Amendment) Rules, 2012
• Such agreement is entered into by the CBDT with the approval of the Central Government, with the taxpayers on the transfer price of international transactions between associated entities.
• The signing of bilateral APAs additionally provides the taxpayers with protection from any anticipated or actual double taxation.
• The APA Scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and determining the arm’s length price of international transactions in advance for a maximum of five future years.
• Further, the taxpayer has the option to rollback the APA for four preceding years, as a result of which, tax certainty is provided for nine years.

Make PDF