In order to avoid disputes in taxation and providing transparency, the Central Board of Direct Taxes (CBDT) for the first time has entered into an Advance Pricing Agreements (APAs) with ‘Rollback’ provision with the two US MNCs.
What is Advance Pricing?
An advance pricing agreement (APA) is an ahead of time agreement between a taxpayer and a taxing authority on an appropriate transfer pricing methodology (TPM) for some set of transactions at issue over a fixed period of time (called “Covered Transactions”).
What is Advance Pricing Agreements (APAs) with ‘Rollback’ provision?
- the CBDT introduced the rules regarding APA with Rollback provision on 14th April 2015
- It facilitates tax liability for future transactions for five years and transactions of previous four years that now provide tax certainty to applicant for nine years altogether, which was mere five regular years of APAs initially.
- Eligibility: to be eligible for the applicable rollback provision, the applicant should have filed the return of Income and Form No. 3CEB on or before the statutory date.
- Central Board of Direct Taxes (CBDT) had entered into this APAs with US MNCs is first ever since the Finance Ministry made announcement in March 2015.
- Over all CBDT has signed 14 APAs of which 13 are unilateral APAs and one is a bilateral APA but did not had facility of rollback provision.
- This will make work more transparent in tax law.
- It will reduce compliance costs and makes tax regime investment friendly.
- It will give a boost to the Indian economy and will reduce litigation.
Some General Knowledge Question:
What is the full form of CBDT?
Answer: Central Board of Direct Tax