advance pricing agreements
India’s Central Board of Direct Taxes (CBDT) and the UK have signed three Bilateral Advance Pricing Agreements (B- APAs) taking the total number of APAs concluded between India and the UK to 5. So, far India has signed a total of 111 APAs both-bilateral and unilateral.
The APAs between India and UK have been signed to have a smooth tax regime between the two countries and reduce litigation arising out of transfer pricing issues. They would cover international transactions in the nature of payment of intra-group service charges and relates to the telecom industry. These agreements also have a rollback provision.
The agreements were reached as a result of the understanding reached with the UK long ago. Already, mutual agreements under the Mutual Agreement Procedure (MAP) Article of the India-UK Double Taxation Avoidance Convention (DTAC) have been exchanged between the competent authorities of two countries.
The APA, which was introduced by India in 2012, is a pact between a taxpayer and the tax department on a transfer pricing procedure.
The international transactions are complex and involve more than one country. The sole objective of the APA is to bring tax certainty in international transactions and overcome the issues due to transfer pricing between related parties.