The Central Board of Direct Taxes (CBDT) of India has signed a record 95 Advance Pricing Agreements (APAs) with Indian taxpayers in FY 2022-23. These agreements provide a framework for determining the arm’s length price of international transactions in advance for a maximum of five future years. The signing of these agreements provides taxpayers with greater certainty in the domain of transfer pricing and contributes significantly to the Government of India’s mission of promoting ease of doing business.
Unilateral and Bilateral APAs
Of the 95 APAs signed this year, 63 were Unilateral APAs (UAPAs) and 32 were Bilateral APAs (BAPAs). This brings the total number of APAs signed since the inception of the programme to 516, comprising 420 UAPAs and 96 BAPAs. The signing of BAPAs provides taxpayers with protection against double taxation, which is a significant issue in cross-border transactions.
FY 2022-23 has been a record-breaking year for the APA programme in several ways. Not only has the CBDT signed the highest ever number of APAs in any financial year since the launch of the programme, but they have also signed the maximum number of BAPAs in any financial year to date. This was made possible by entering into Mutual Agreements with India’s treaty partners, including Finland, the UK, the US, Denmark, Singapore, and Japan. On 24th March 2023, a record was also set for the largest number of single day signings in the history of the programme, with a total of 21 APAs signed.
Rollback Option for Taxpayers
The APA Scheme allows taxpayers to have greater certainty by providing them with the option to rollback the APA for four preceding years. As a result, tax certainty is provided for nine years, which is beneficial for multinational enterprises (MNEs) with a large number of cross-border transactions within their group entities.
The signing of a record number of APAs in FY 2022-23 is a significant achievement for the CBDT and the Government of India. The APA programme has contributed significantly to the government’s mission of promoting ease of doing business and providing greater certainty to taxpayers in the domain of transfer pricing. The signing of BAPAs has also provided taxpayers with protection against double taxation. The CBDT appreciates the cooperative attitude of taxpayers and their equal partnership in the APA programme.
According to a LiveMint News Report, there were approximately 700 pending applications for APA with CBDT at the start of FY 2022-23. Please provide the most recent status update. I’m not sure if signing 95 APAs is a “Record Breaking Number.” Using the same analogy, we can call it the “Record Number of APA Backlog Cases with CBDT in FY 2022-23.” Statistics can be deceiving; use with caution! Nonetheless, CBDT should be commended for clearing the backlog at such a rapid pace.