Advance Pricing Agreements (APA) - Preventing Future Tax Controversies for Tax Payers

NEW DELHI, December 9, 2016 /PRNewswire/ --

In an environment where the government has been trying to attract multinational enterprises to 'Make in India', it is time to introduce initiatives or measures to signal a clear focus on making doing business in India easier. One such initiative has been the introduction of APA programme. The domestic appeal and dispute resolution process in India is slow and very time consuming. Therefore, the need for an alternative dispute resolution mechanism such as the Advance Pricing Agreement (APA) program, which provides a proactive opportunity for taxpayers to not only prevent future tax controversies but also to provide a rational basis for settling past disputes where an APA outcome may have a significant persuasive value, said Swati Aggarwal, Senior Manager (International Taxation) of Neeraj Bhagat & Co., a Chartered Accountancy firm based out of New Delhi .

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What is an Advance Pricing Agreement (APA)? 

An APA is an agreement between a tax payer and tax authority determining the transfer pricing methodology for pricing the tax payer's international transactions with its associated enterprises (AE's) for future years.

An APA can be unilateral, bilateral, or multilateral.

• Unilateral APA: an APA that involves only the tax payer and the tax authority of the country where the tax payer is located.

• Bilateral APA (BAPA): an APA that involves the tax payer, associated enterprise (AE) of the tax payer in the foreign country, tax authority of the country where the tax payer is located, and the foreign tax authority.

• Multilateral APA (MAPA): an APA that involves the tax payer, two or more AEs of the tax payer in different foreign countries, tax authority of the country where the tax payer is located, and the tax authorities of AEs.

About the author:  

Swati Aggarwal, is the Senior Manager (International Taxation) of Neeraj Bhagat & Co, an Indian Chartered Accountancy firm serving various MNC'S from across the globe. Neeraj Bhagat & Co. has its offices at New Delhi, Gurgaon and Mumbai. They are part of Allinial Global Accounting Association which is one of the World's Top 10 in accounting associations.

For more information please log on to:http://www.neerajbhagat.com or email at [email protected].