CBDT signs 11 new unilateral APAs; total 31 so far

NEW DELHI: The Finance Ministry today said it has so far entered into 31 Advance Pricing Agreements with Indian subsidiaries of foreign companies operating in various segments.

"The Central Board of Direct Taxes (CBDT) has entered into 11 more unilateral Advance Pricing Agreements (APAs). With this, CBDT has so far signed 31 APAs (30 unilateral and one bilateral)", the Finance Ministry said in a statement.

Out of the 11 new APAs, while seven have rollback provisions contained in them, the other four are for future five years, it said.

The CBDT aims to finalise another 30 to 40 APAs before the end of this fiscal to provide stability and confidence to foreign enterprises operating in India.

The APA programme was introduced in the Income-tax Act, 1961 in 2012.

An APA, usually for multiple years, is signed between a taxpayer and the tax authority (CBDT) on an appropriate transfer pricing methodology for determining the price and ensuing taxes on intra-group overseas transactions.

Transfer pricing - transaction prices between separate entities of a large company - has generated much heat in connection with investments by large MNCs like Vodafone, Shell, WNS and Nokia.

MNCs are often accused of misusing the system to transfer profits to their subsidiaries in countries that have low tax rates.

The law requires that goods and services be sold to subsidiaries by parent companies at arm's length price - the price at which goods are traded between unconnected companies.