Press Release dated 31st March, 2014
No.402/92/2006-MC
The CBDT has
signed the first batch of 5 unilateral Advance Pricing Agreements (APA) on 31st
March 2014. The agreements cover a period of 5 years from AY 2014-15 to AY
2018-19 and specify the arm’s length price for the covered international
transactions entered into by the taxpayers. These agreements cover a range of
international transactions, including interest payments, corporate guarantees,
non -binding investment advisory services and contract manufacturing. The
agreements pertain to different industrial sectors including pharmaceuticals, telecom,
exploration and financial services.
The agreements
provide a complete certainty to the taxpayers for 5 years with regard to the covered
international transactions. The APA programme came into effect on 1st July 2012
and the first batch of 146 APA applications was received in March 2013. The
CBDT has been able to conclude the first set of agreements within a period of 1
year as against the internationally accepted norm of at least 2 years.
The whole scheme
of APA has been designed with the intention of creating a taxpayer friendly environment
in transfer pricing matters and to minimise the transfer pricing disputes.
Before filing the APA applications, taxpayers are given the opportunity to
share their expectations from the APA process during the pre-filing
consultations and the APA team shares a broader understanding of the forthcoming
APA procedure.
Having received
an APA application, the APA team works towards establishing the appropriate economic
analysis of the covered international transactions which also involves a site
visit i.e. physical verification of the business of the applicant with regard
to the said transactions. It is this detailed fact finding exercise which lends
credibility to the determination of arm’s length price under the APA. The APA
team furnishes a report incorporating functions, assets and risk (FAR) analysis
which is further examined at length by the CBDT before its submission for the final
approval of the Central Government.
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