CBDT Signs 95 Advance Pricing Agreements

• 08 Apr 2023

Why in News?

The Central Board of Direct Taxes (CBDT) has entered into a record 95 Advance Pricing Agreements (APAs) in FY 2022-23 with Indian taxpayers.

• This includes 63 Unilateral APAs (UAPAs) and 32 Bilateral APAs (BAPAs).
  • This is the maximum number of BAPAs that CBDT has signed in any financial year till date.
• Mutual Agreements with India’s treaty partners namely Finland, the UK, the US, Denmark, Singapore, and Japan led to the signing of the BAPAs.

What is an Advance Pricing Agreement (APA)?

• About:
  • The Advance Pricing Agreement (APA) programme in India was launched in 2012 vide the Finance Act, 2012 through the insertion of Sections 92CC and 92CD in the Income-tax Act, 1961.
  • APA is an agreement between a taxpayer and tax authority determining the transfer pricing methodology, for pricing the taxpayer’s international transactions for future years.
    • Once the APA is sealed, the methodology is to be applied for a certain period of time based on the fulfilment of certain terms and conditions.
• Types:
  • An APA can be unilateral, bilateral, or multilateral.
    • Unilateral APA: An APA that involves only the taxpayer and the tax authority of the country where the taxpayer is located.
    • Bilateral APA (BAPA): an APA that involves the taxpayer, associated enterprise (AE) of the taxpayer in the foreign country, tax authority of the country where the taxpayer is located, and the foreign tax authority.
    • Multilateral APA (MAPA): an APA that involves the taxpayer, two or more AEs of the taxpayer in different foreign countries, tax authority of the country where the taxpayer is located, and the tax authorities of AEs.
• Significance:
  • The APA programme has contributed significantly to the Government of India’s mission of promoting ease of doing business.
    • The programme especially benefits cross-border transactions.

Central Board of Direct Taxes (CBDT)

• It is a statutory authority that functions under the Central Board of Revenue Act, 1963.
  • It is a part of the Department of Revenue in the Ministry of Finance.
• It provides inputs for policy and planning of direct taxes in India and is also responsible for the administration of direct tax laws through the Income Tax Department.
• Direct Taxes include income tax, corporation tax etc.

Source: PIB