Tax Update Detail

CBDT signs 26 advance pricing agreements in April-August

The Central Board of Direct Taxes (CBDT) on Wednesday said it has signed 26 advance pricing agreements (APAs) in the April-August period. The total APAs entered into by the board now stands at 297, which includes 32 bilateral APAs (BAPAs).

APAs were introduced in 2012 by the government to provide tax certainty to those multinational corporations that agree to certain principles relating to the valuation of their cross-border transactions. They are primarily aimed at avoiding transfer pricing disputes arising from cross-border transactions undertaken by MNCs.

“Out of these 26 APAs, 1 is a BAPA entered into with the UK and the remaining 25 are unilateral APAs (UAPAs). The BAPAs and UAPAs entered into during this period pertain to various sectors and sub-sectors of the economy like information technology, banking, semiconductor, power, pharmaceutical, hydrocarbon, publishing and automobile, etc,” CBDT said in a statement.

Further, the board said that the international transactions covered in all these agreements include contract manufacturing, provision of software development services, back office engineering support service, provision of back office (ITeS) support services, provision of marketing support services, payment of royalty for use of technology and brand, trading and distribution, payment of charter charges, corporate guarantee, intra-group services and interest on financial instruments, among others.

Through these agreements, the tax department and the companies seek to resolve transfer pricing disputes in advance — before the cross-border related-party transaction actually takes place. APAs can be multilateral or bilateral (involving the company concerned, CBDT and the tax authorities of one or more countries) or unilateral (without the tax authorities of other countries).