The Central Board of Direct Taxes (CBDT) has entered into 62 Advance Pricing Agreements (APA) in FY 2021-22 with Indian taxpayers. This includes 13 Bilateral APAs (consequent to Mutual Agreement between India and its treaty partners) and 49 Unilateral APAs. With this, the total number of APAs since inception of the APA program has gone up to 421.

Despite severe economic and social disruption caused by the CoVID-19 pandemic in first part of the financial year, the number of APAs signed compares very well with the APAs signed in the preceding two years (31 APAs in FY 2020-21 and 57 APAs in FY 2019-20).

The APA Scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and determining the arm’s length price of international transactions in advance for the maximum of five future years. Further, the taxpayer has the option to rollback the APA for four preceding years, as a result of which, total nine years of tax certainty is provided.

The progress of the APA scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime and increasing the ease of doing business in India. CBDT appreciates the cooperative and transparent attitude of taxpayers in this regard.

Advance Pricing Agreements provide transfer pricing certainty across prior and future years, reducing disputes and promoting cooperative compliance. The APA program expanded through additional bilateral and unilateral agreements, enabling advance determination of transfer pricing methods and arm's length price for specified international transactions for up to five future years, with a rollback option for preceding years that together provide multi year transfer pricing certainty. The mechanism is presented as reducing disputes, fostering a non adversarial tax regime, and improving ease of doing business, with recent growth maintained despite pandemic disruptions.