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CBDT signs two bilateral Advance Pricing Agreements with United Kingdom

CBDT signs two bilateral Advance Pricing Agreements with the United Kingdom

  • The Central Board of Direct Taxes has signed two bilateral Advance Pricing Agreements with the United Kingdom on 29th January 2016.
  • After signing it, CBDT has concluded total three bilateral APAs the first one being a bilateral APA signed with Japan in December 2014. The two bilateral APAs were signed with two Indian group entities of a UK based MNC.
  • The APAs have been entered into soon after the Competent Authorities of India and the United Kingdom finalised the terms of the bilateral arrangement under the Mutual Agreement Procedure (MAP) process contained in the India-UK DTAA.
  • The APAs cover the period 2013-14 to 2017-18 and also have a “Rollback” provision for 2 years (2011-12 and 2012-13).
  • The transfer pricing disputes on the same transaction were recently resolved under MAP for each of these two companies for the years 2006-07 to 2010-11.
  • The two Indian companies have been provided with tax certainty for 12 years each. This is a significant step towards providing a stable and predictable tax regime.
  • The two APAs are also significant because they address the issues of payment of management & service charges and payment of royalty. These transactions generally face prolonged and multi-layered transfer pricing disputes.
  • The CBDT has signed total 41 APAs out of which 38 are unilateral and 3 are bilateral.
  • Central Board of Direct Taxes (CBDT):
    • The Central Board of Direct Taxes (CBDT) provides essential inputs for policy and planning of direct taxes in India.
    • The CBDT is also responsible for the administration of the direct tax laws through Income Tax Department. The CBDT is a statutory authority functioning under the Central Board of Revenue Act, 1963. It is India’s official FATF unit.
    • The CBDT is headed by CBDT Chairman and also comprises six members, all of whom are Special Secretary to Government of India.
    • The CBDT Chairman and Members of CBDT are selected from Indian Revenue Service (IRS), a premier civil service of India, whose members constitute the top management of Income Tax Department.

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