New Delhi, Jan 14 The Central Board of Direct Taxes (CBDT) on Friday entered into a bilateral Advance Pricing Agreement (APA) with an Indian subsidiary of a Japanese trading firm with rollback provisions, said an official statement.
“Bilateral APA is an important step towards ascertaining certainty in transfer pricing matters of multinational company cases and dispute resolution,” said the statement.
The APA scheme was introduced in the Income-Tax Act in 2012 and the rollback provisions in 2014.
Under the agreement, certainty in tax treatment is provided for five years while rollback provides dispute redressal for four past years preceding APA years.
The board had also modified a bilateral APA with another Indian subsidiary of a Japanese firm to include rollback provisions.
“The CBDT has entered into eight bilateral APAs, including three with Indian subsidiaries of Japanese companies with rollbacks,” added the statement.
Multinational firms may prefer a bilateral APA as it facilitates understanding between the tax administrations of the two countries and for the transfer pricing adjustment by an Indian entity,” pointed out the statement.
Under the scheme, adjustment is also available for the related foreign entity to avoid economic double taxation.
“As the APA scheme strengthens the government’s mission to foster a non-adversarial tax regime, CBDT is expected to sign more bilateral APAs,” added the statement.