Tax authority Central Board of Direct Taxes (CBDT) today signed a bilateral Advance Pricing Agreement (APA) with a Japanese company.
"This is India's first bilateral APA. The APA is for a period of five years," an official statement said.
APAs will improve investment climate in the country, it said, adding the APA has been finalised in a period of about one-and-a-half years, which is shorter than time normally taken in finalising APAs internationally.
The scheme has been introduced to bring about certainty and uniformity in transfer pricing matters of multi-national companies and reducing litigation.
In the context of growing economic ties between Japan and India, especially after Prime Minister's visit to Japan, this APA is expected to generate positive sentiments among Japanese investors in India.
Commenting on the first Bilateral APA between India and Japan, S P Singh, Senior Director, Deloitte Haskins & Sells said transfer pricing has become the most discussed tax topic over the last few years, not only among tax experts and policy makers, but also in corporate board rooms.
Transfer pricing authorities are often considered very aggressive and unappreciative of business and economic realities, he said.
In 2012 the government introduced mechanism of Advance Pricing Agreement (APA), he said, adding that to avoid protracted litigation, many multinational companies have decided to adopt the APA route.
