1. India signs 16 advance pricing agreements with MNCs

India signs 16 advance pricing agreements with MNCs

The income tax department has signed 16 advance pricing agreements (APAs) with multinational companies (MNCs) so far, exempting their transactions with local units from rigorous tax audits.

By: | Updated: October 3, 2015 12:31 AM

The income tax department has signed 16 advance pricing agreements (APAs) with multinational companies (MNCs) so far, exempting their transactions with local units from rigorous tax audits. APAs were introduced to give tax certainty to MNCs that agree on certain principles in the valuation of their cross-border transactions.

These companies are in the business of telecommunication, oil exploration, pharmaceuticals, finance, banking and software development.

India has also has resolved 45 tax disputes with multinational companies, especially US-based IT and IT-enabled services firms, under provisions of bilateral tax treaties for avoiding double taxation. Sources said the tax department is working on another set of disputes for resolution.

The India-US treaty provides for tax authorities of both the countries to bilaterally apportion the income of MNCs from cross-border operations to be taxed in each country and avoid double taxation.

The scheme, called mutual agreement procedure (MAP), offers MNCs a quick dispute resolution mechanism. Most of the large US-based software companies having contract research and development operations in India have faced tax disputes on how much of the local arms’ revenue from services to the offshore parent is taxable in India.

“We are working on signing as many as 50 APAs, including some bilateral ones and resolving about 100 tax disputes under MAP soon,” said a person privy to the development.

Deal struck

The income tax department has signed 16 advance pricing agreements with MNCs so far, exempting their transactions with local units from rigorous tax audits.

India has also has resolved 45 tax disputes with MNCs, especially US-based IT and IT-enabled services firms, under provisions in a bilateral treaty.

The India-US treaty provides for tax authorities of both countries to bilaterally apportion MNcs’ income from cross-border operations to be taxed in each country and avoid double taxation.

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