Since its inception, the pre-price agreement program has been a success in India as a dispute prevention mechanism. However, a clarification issued by the Indian government on 27 November 2017 indicated that CBDT had decided to accept the transfer prices of POPs and bilateral APP applications, regardless of the existence or absence of Article 9, paragraph 2, in the DBAA. Transfer pricing authorities are often seen as aggressive and not rewarding for commercial and economic realities, he said. „A clarification of India`s position on this issue clearly shows that the government is seriously considering the concerns expressed by multinationals and taking steps to resolve the same,“ Nitin Narang, executive director of Transfer Prices at Nangia-Co, said in a statement. „It also reinforces governments` focus on improving India`s ranking to the lightness of the activity index.“ The Central Office for Direct Taxes has decided to accept „MAP transfer prices and bilateral APP applications, regardless of whether or not Article 9, paragraph 2 (or its equivalent article) exists in the DBAA [double taxation agreements],“ the Finance Ministry said. The regime was put in place to ensure the security and consistency of transfer prices for multinational companies and to reduce litigation. The APA process begins with a pre-consultation meeting. The meeting is being held to determine the scope of the agreement, to understand related transfer pricing issues and to examine the adequacy of international transactions to the APP. A formal application is filed as soon as the prior declaration is completed. The progress of the APA program reinforces the government`s commitment to promoting a non-contradictory tax system. The Indian APA program has been valued nationally and internationally for its ability to deal with complex transfer pricing issues in a fair and transparent manner. As a result, transfer pricing (TP) is controversial and controversial around the world, with tax authorities struggling to preserve their share of tax due in their respective jurisdictions.
An APA is an agreement between a taxpayer and the tax authority that establishes the transfer pricing method for setting the prices of the taxpayer`s international transactions for years to come. An APA provides certainty about the tax results of the taxpayer`s international transactions. An APA, in simple terms, is an agreement between the subject and the tax authority that sets the price for the length of the arm or determines how the price of the length of the arm should be determined with respect to transactions between related parties. The Central Board of Direct Taxes (CBDT) signed the 300th Pre-Price Contract (APA) in September. This is an important step in the Indian APP program, now in its seventh year. APAs were commissioned in India in 2012 The signing of these agreements brought the total number of APAs concluded by the Central Board of Direct Taxes (CBDT) to 196, including 178 unilateral APAs and 18 bilateral APAs.