The Central Board of Direct Taxes (CBDT) on Thursday said it entered into seven unilateral advance pricing agreements (APAs) last month, which takes the number of such pacts to more than 200. The board, which is a policy-making body for the income tax department, said it has signed 203 APAs, including 185 unilateral and 18 bilateral pacts, till date. In the current financial year, the board has so far entered into 51 APAs (44 unilateral and seven bilateral).
APAs were introduced in 2012 by the government to give tax certainty to MNCs that agree on certain principles in valuation of their cross-border transactions. They also provide assessees with an alternate dispute resolution mechanism with respect to transfer pricing.
The APAs signed in February pertain to the pharmaceuticals, automobiles, financial and food & beverages sectors. The international transactions covered in these agreements include manufacturing, provision of software development services, IT-enabled services, payment of royalty, provision of contract R&D services, marketing support services, distribution, AMP expenses, provision of engineering design support services, sourcing support services and payment of interest, CBDT said in a statement.
While unilateral pacts involve only the taxpayer and the tax authority of the country where the taxpayer is located, bilateral agreements involve the taxpayer, associated enterprise of the taxpayer in the foreign country, the tax authority of the country where the taxpayer is located and the foreign tax authority.