The Central Board of Direct Taxes has signed bilateral advance pricing agreements with Indian arm of a Japanese trading company, a move that will help bring down transfer pricing disputes relating to intra-group transactions.
"The Central Board of Direct Taxes (CBDT) entered into a bilateral advance pricing agreement (APA) on August 2, 2016, with Indian subsidiary of a Japanese trading company. This is the first bilateral advance pricing agreement with a Japanese company having a rollback provision in it," a finance ministry statement said today.
Overall, it is fourth bilateral APA signed by CBDT.
Signing of the pact is an important step towards ascertaining certainty in transfer pricing matters of MNC cases and dispute resolution, the statement noted.
The APA scheme was introduced in the Income-Tax Act in 2012 and the rollback provision in 2014.
The scheme intends to provide certainty to taxpayers in the domain of transfer pricing by specifying methods of pricing and setting the prices of international transactions in advance.
Its progress strengthens the government's mission of fostering a non-adversarial tax regime, the statement said.
CBDT expects more APAs to be concluded and signed in the near future.
An APA, usually for multiple years, is signed between a taxpayer and the tax authority (CBDT in India) on an appropriate transfer pricing methodology for determining the price and ensuing taxes on intra-group overseas transactions.
