In the financial year 2023-24, the Central Board of Direct Taxes (CBDT) achieved a significant milestone by signing 125 Advance Pricing Agreements (APAs) with taxpayers, marking the highest number of APA signings since the programme’s inception. The APA Scheme, overseen by the CBDT, aims to streamline transfer pricing by establishing pricing methods and determining the arm’s length price of international transactions in advance for up to five years.
This proactive approach reduces disputes between taxpayers and tax authorities, fostering a stable tax environment. Taxpayers can choose between Unilateral APAs (UAPAs) or Bilateral APAs (BAPAs), providing clarity in pricing methodologies and additional certainty for cross-border transactions.
Out of the 125 APAs signed in FY24, 86 are Unilateral APAs and 39 are Bilateral APAs, representing a significant increase of 31% compared to the previous financial year. The total number of APAs since the programme’s inception now stands at 641, comprising 506 UAPAs and 135 BAPAs.
The APA Scheme offers taxpayers the option to roll back the APA for the preceding four years, providing tax certainty for a total of nine years, aligning with the government’s efforts to provide businesses with a stable and predictable tax environment.
Additionally, FY24 witnessed the highest number of BAPAs signed in any financial year to date, resulting from Mutual Agreements with India’s treaty partners. These agreements, with countries including Australia, Canada, Denmark, Japan, Singapore, the UK, and the US, play a crucial role in reducing transfer pricing disputes arising from international transactions between related companies located in two countries.
The surge in APA signings underscores the scheme’s efficacy in ensuring tax certainty, contributing to the ease of doing business in India, particularly for multinational enterprises with significant cross-border transactions. Ongoing collaboration between the CBDT and taxpayers is essential for maintaining progress and strengthening India’s appeal as a global business destination.
