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Number of Indian Bilateral APAs Continues to Rise

Posted on Apr. 5, 2019

The number of signed bilateral advance pricing agreements through India’s APA program inched up as the total tally of executed APAs dipped during the last fiscal year.

India’s Ministry of Finance said April 3 that the Central Board of Direct Taxes (CBDT) entered into 52 APAs during fiscal 2018-2019, including 11 bilateral APAs. The CBDT entered into three bilateral deals during March that involved Australia, the Netherlands, and the United States, according to a MOF release.

According to the CBDT’s second annual report on its APA program, the tax authority executed 67 APAs during fiscal 2017-2018. Nine of those agreements were bilateral APAs. During the previous year, there were 88 signed APAs, of which eight were bilateral agreements.

The MOF release does not provide an explanation for the decrease in overall signed deals during fiscal 2018-2019. However, the 2017-2018 annual report highlighted a few reasons why the number of deals executed during that period fell short of that of the previous year, including staff shortages and the need for additional time to analyze increasingly complex cases.

That report also noted the recent rise in the number of bilateral agreements executed with “Indian taxpayers after [the] conclusion of mutual agreements with the competent authorities of treaty partners.” It said the trending increase in signed bilateral APAs was “likely to continue as a number of bilateral APAs have been resolved with the competent authorities of treaty partners, but the agreements with Indian taxpayers could not be signed by 31st March, 2018 due to the time required to draft and finalize mutual agreements with treaty partners.”

The MOF indicated that since the start of the APA program in 2012, the CBDT has entered into 271 APAs, including 31 bilateral pacts.

“The progress of the APA scheme strengthens the government’s resolve of fostering a non-adversarial tax regime,” the MOF release says. “The Indian APA program has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner."

According to the release, 18 total agreements were signed during March that cover several international transactions, including contract manufacturing, provision of software development services, provision of several types of support services, payments of royalty and interest, and trading.

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