Central Board of Direct Taxes (CBDT) signed first Advance Pricing Agreements (APAs) with ‘Rollback’ provision.

In order to bring certainty in tax liability and avoid disputes in taxation with the multinationals operating in India, the Central Board of Direct Taxes (CBDT) for the first time has entered into an Advance Pricing Agreements (APAs) with ‘Rollback’ provision with the two US MNCs.
Advance Pricing Agreements (APAs) with ‘Rollback’ provision facilitates tax liability for future transactions for five years and transactions of previous four years that now provide tax certainty to applicant for nine years altogether, which was mere five regular years of APAs initially.
Central Board of Direct Taxes (CBDT) had entered into this APAs with US MNCs is first ever since the Finance Ministry made announcement in March 2015.
Over all CBDT has signed14 APAs of which 13 are unilateral APAs and one is a bilateral APA but did not had facility of rollback provision.
Advance Pricing Agreements (APAs)
It is an agreement between a taxpayer and the tax authority that settles transfer prices and of setting prices of international transactions in advance and normally covers multiple years.

  • It provides certainty to taxpayers regarding transfer pricing that aim to avoid disputes between taxpayer and tax regulator.
  • This will introduce certainty in tax law reduces compliance costs and makes tax regime investment friendly.
  • It will give a boost to the Indian economy as the investors will adopt this APA route with rollback provision to reduce litigation and to business with ease.

Note: With an aim to avoid dispute regarding taxation with the MNCs recently India and US has signed Mutual Agreement Procedure (MAP) provision of Double Taxation Avoidance Convention (DTAC).


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