India Concluding More Bilateral Advance Pricing Agreements

India Concluding More Bilateral Advance Pricing Agreements

The Indian tax authority, Central Board of Direct Taxes, has published its second annual report on advance pricing agreement (APA) highlighting the progress made in 2017-18.

According to the report, the tax authority entered into 219 APAs as at March 31, 2018, out of which 20 were bilateral APAs. A total of 67 APAs were entered in 2017-18.

Bilateral APAs going up

A total number of 53 bilateral APAs were filed in 2017-18, the highest since the launch of the APA program in 2012. The filing of bilateral APA applications has more than doubled in 2017-18, as compared to its immediately preceding year.

With the US Competent Authority opening up the bilateral APA program from February 2016, and India now willing to accept bilateral APAs in respect of all treaty partners, the number of bilateral APA applications are bound to go up further in coming years, the report notes.

US, UK and Japan lead the list

In the initial years of the APA program, the UK and Japan were leading the list because there was no bilateral APA program available with the US. However, once the US opened its bilateral APA program with India in February 2016, the applications for India-US bilateral APAs have increased.

Almost 75 percent of the total bilateral APA applications are with three countries – the US, the UK, and Japan.

The maximum number of bilateral APAs signed so far has been ten with the UK, followed by Japan at five.

Other takeaways

In 2017-18, the average time taken to conclude bilateral APAs has gone up to 45.78 months. The service sector of the Indian economy has been overwhelmingly covered in bilateral APAs.

The transactional net margin method (TNMM) has been adopted as the most appropriate transfer pricing method in 17 out of the 18 international transactions covered in the nine bilateral APAs entered into in 2017-18.