The Central Board of Direct Taxes (CBDT) in India has signed a record 95 Advance Pricing Agreements (APAs) with Indian taxpayers in the financial year 2022-23. Out of the total number of agreements, 63 were Unilateral APAs (UAPAs) and 32 were Bilateral APAs (BAPAs).
This is the highest number of APA signings ever recorded in any financial year since the launch of the APA programme. Additionally, this year has also seen the maximum number of BAPAs signed in any financial year to date. The BAPAs were signed as a result of mutual agreements with India’s treaty partners, including Finland, the UK, the US, Denmark, Singapore, and Japan.
What is an Advance Pricing Agreement (APA)?
An APA is an agreement between a taxpayer and the tax authority, which determines the transfer pricing methodology for pricing the taxpayer’s international transactions for future years. The methodology is applied for a certain period of time, based on the fulfillment of certain terms and conditions, known as critical assumptions. The APA provisions were introduced in the Income-tax Act, 1961 (Act) with effect from 1st July 2012.
Different Types of APAs
There are three types of APAs:
- Unilateral APA: A unilateral APA involves only the taxpayer and the tax authority of the country where the taxpayer is located.
- Bilateral APA (BAPA): A BAPA involves the taxpayer, the associated enterprise (AE) of the taxpayer in the foreign country, the tax authority of the country where the taxpayer is located, and the foreign tax authority.
- Multilateral APA (MAPA): A MAPA involves the taxpayer, two or more AEs of the taxpayer in different foreign countries, the tax authority of the country where the taxpayer is located, and the tax authorities of AEs.
Benefits of the APA Programme
The APA programme has contributed significantly to the Government of India’s mission of promoting ease of doing business, especially for multinational enterprises (MNEs) that have a large number of cross-border transactions within their group entities. The programme offers several benefits, including:
- Certainty and predictability in tax positions for the taxpayer.
- Reduction of transfer pricing disputes between taxpayers and tax authorities.
- Reduction of transfer pricing litigation, which leads to cost savings for taxpayers and the government.
Central Board of Direct Taxes (CBDT)
The Central Board of Direct Taxes is a statutory authority that functions under the Central Board of Revenue Act, 1963. The officials of the Board, in their ex-officio capacity, also function as a Division of the Ministry dealing with matters relating to the levy and collection of direct taxes.
The Board consists of a Chairman and six Members, including Member (Income Tax & Revenue), Member (Legislation), Member (Administration), Member (Investigation), Member (TPS & System), and Member (Audit & Judicial).
Why In News
In FY 2022-23, the Central Board of Direct Taxes (CBDT) set a new record by entering into 95 Advance Pricing Agreements (APAs) with Indian taxpayers, comprising of 63 Unilateral APAs (UAPAs) and 32 Bilateral APAs (BAPAs).
MCQs about Advance Pricing Agreements (APAs)
-
What does APA stand for?
A. Advance Pricing Agreement
B. Agreement of Price Advances
C. Advance Payment Agreement
D. Price Adjustment Agreement
-
Which of the following is NOT a type of APA?
A. Unilateral APA
B. Bilateral APA
C. Multilateral APA
D. Group APA
-
How many Advance Pricing Agreements (APAs) did the CBDT enter into with Indian taxpayers in FY 2022-23?
A. 95
B. 63
C. 32
D. 50
-
What is the composition of the Central Board of Direct Taxes (CBDT)?
A. Chairman and six members
B. Chairman and five members
C. Chairman and four members
D. Chairman and three members
Boost up your confidence by appearing our Weekly Current Affairs Multiple Choice Questions
