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Advance Pricing Agreements

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Context

  • The Central Board of Direct Taxes (CBDT) has entered into a record 125 Advance Pricing Agreements (APAs) in FY 2023-24 with Indian taxpayers.

 About

  • This marks the highest ever APA signings in any financial year since the launch of the APA programme in 2012.
  • During FY 2023-24 CBDT also signed the maximum number of Bilateral APAs in any financial year till date.
  • The BAPAs were signed as a consequence of entering into Mutual Agreements with India’s treaty partners namely Australia, Canada, Denmark, Japan, Singapore, the UK and the US.
  • An advance pricing agreement (APA) is a formal arrangement between a tax authority and a multinational enterprise (MNE) in which the parties jointly agree on the MNE’s transfer pricing methodology, estimated taxable income, and tax payments for a fixed period, thus reducing the likelihood of an income tax dispute.
  • The APA program addresses actual or potential disputes and provides tax certainty to MNCs by allowing them to negotiate how profit margins for India operations will be calculated.