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India, Japan Conclude First Bilateral APA

by Mary Swire,, Hong Kong

24 December 2014

On December 19, 2014, India's Central Board of Direct Taxes (CBDT) signed its first bilateral advance pricing agreement (APA) with the Japanese tax authority.

"The APA has been finalised in a period of about one and a half years, which is shorter than time normally taken in finalising APAs internationally," the CBDT said in a release. The APA is for a period of five years.

The CBDT said: "The APA scheme has been introduced to bring about certainty and uniformity in transfer pricing matters of multinational companies and reduce litigation. APAs will improve investment climate in the country. In the context of growing economic ties between Japan and India...this APA is expected to generate positive sentiments among Japanese investors in India."

Finance Minister Arun Jaitley, in his 2014/15 budget speech, said that authorities would look to speed up their responses to APA requests. He proposed to introduce a "roll back" provision, which would allow an APA entered into for future transactions to also apply to international transactions undertaken during the previous four years in specified circumstances.

India is also seeking to add provisions to its double tax avoidance agreements with France, Germany, Italy, Singapore, and South Korea, to allow compensatory or corresponding adjustments under bilateral advance pricing agreements.

India's APA program came into effect in July 2012, and the first five APAs were signed in April 2014.

TAGS: compliance | Finance | tax | investment | business | tax compliance | India | tax avoidance | revenue guidance | budget | enforcement | ministry of finance | tax authority | agreements | multinationals | tax planning | transfer pricing | advance pricing agreement (APA) | tax reform | trade | Japan | Tax

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