The Central Board of Direct Taxes signed 11 unilateral APAs on 28th March, 2016. With this signing, India has entered into 59 bilateral and/or unilateral APAs. The Advance Pricing Agreement (APA) programme was introduced by the Finance Act, 2012 to provide a predictable and non-adversarial tax regime and to reduce litigation in the Indian transfer pricing regime. 50 of these agreements have been signed in the current financial year. The agreements cover a range of international transactions, including corporate guarantees, royalty, software development services, IT enabled services and trading. The agreements pertain to different industrial sectors like telecom, media, automobiles, IT services, etc. Some of the agreements have rollback provisions and provide certainty to the taxpayers for 9 years with regard to the covered international transactions.

Rollback provisions in APAs were introduced in the July 2014 Budget to provide certainty on the pricing of international transactions for 4 years (rollback years) preceding the first year from which APA becomes applicable. With the notification of Rollback rules in March 2015, the taxpayer has been provided the option to choose certainty in transfer pricing matters with the Government for a total of nine years (5 future years and 4 prior years).

Since the notification of the APA scheme on 30.08.2012, approximately 580 applications for APAs have been received and about half of these contain a request for the Rollback provisions. The number of applications is indicative of the wide international and national appreciation of the India’s APA programme’s ability to address complex transfer pricing issues in a fair and transparent manner.

Advance Pricing Agreements secure transfer pricing certainty, including rollback options to extend pricing certainty to prior years. Advance Pricing Agreements secure pre agreed transfer pricing to promote predictability and reduce litigation. Introduced by the Finance Act 2012, the APA programme encompasses unilateral and bilateral agreements across multiple sectors and transaction types. The regime incorporates rollback provisions-established in the July 2014 Budget and notified in March 2015-that allow taxpayers to obtain pricing certainty for a total of nine years (five prospective APA years plus four prior years by rollback), and about half of submitted applications include a rollback request.