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Why APA?
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Types of APA
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Statutory Provisions
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The APA Scheme
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Administration of APA
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Commitment towards reduction of
litigation
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An international best practice
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Demand from the clients
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APAs could be Unilateral, Bilateral or
Multilateral
Cross-country experience reveals that
generally taxpayers go for bilateral APAs as
they avoid double taxation.
Unilateral APA is useful when there is no
taxation in the other country.
Multilateral APA takes a very long time for
negotiation.
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APA will determine either the Arms’ Length
Price or the manner of determining the ALP.
Canada has a list of ineligible persons,
which includes trusts and companies
operating from tax havens.
UK allows APA to any UK business.
Japan allows APA for any legal entity.
Indian APA scheme will apply to all persons.
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Unlike Canada and Japan, India has
introduced specific legislative provisions in
section 92CC and 92CD for APA. Power has
been given by the Parliament to CBDT to
enact an APA scheme for its administration.
UK also has specific
administration of APA.
legislation
for
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The Statute allows an APA for a maximum
period of 5 years but does not prescribe any
minimum period.
Canada, UK and Japan have APAs for 3 to
5 years.
The agreement would be binding on both
parties.
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In Japan it is Advance Pricing Arrangement,
hence there is no agreement between tax
department and the taxpayer. In UK and
Canada there is an agreement.
In India there would be an agreement and
the Board has to sign the agreement with
the taxpayer.
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The Board may declare an APA to be void
ab initio if the same is found to have been
entered into on the basis of fraud and
misrepresentation of facts.
Once an APA is declared as void ab initio,
the normal provisions of the Income-tax Act
shall apply to the assessee.
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The CBDT has to notify the APA Scheme in
exercise of the powers contained in Section
92CC of the Income-tax Act;
The Scheme would govern the APA regime
in India;
International experience and best practices
would be suitably incorporated in it.
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APA is to be entered by the Board with the
applicant after obtaining the approval of
the Central Government.
In other jurisdictions, Competent Authority
administers the bilateral/multilateral APAs
whereas, Unilateral APA is administered by
another team.
A
similar
arrangement
is
being
contemplated in India.
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Japan and UK do not charge any fee.
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Canada charges out of pocket expenses.
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There is a proposal in India to charge an
APA fee.
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Pre-filing Consultation: India is likely to have
provision for pre-filing consultation like other
countries to determine suitability of APA.
The modalities for filing of pre-filing
consultation application would be spelt out
in the notification.
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After pre-filing consultation, the applicant
would be required to file an application
within a particular time. This is same as in UK
and Japan.
In UK, the CA has the power to accept
application beyond this period.
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Japan, Canada and UK all rely on site
visits
(even
joint
visits
for
bilateral/multilateral APA) in order to find
facts and prepare position paper. India
would have similar provisions.
The APA teams have to ascertain the true
facts and may call for any documents
from the applicant. For bilateral/
multilateral APA, representative of CA to
be involved.
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Canada does not allow it for unilateral APA
but allows it for bilateral APA.
Japan allows roll back.
There may not be any provision for roll back
in India as it is felt that previous cases can
be resolved under MAP.
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Renewal of APA in India is likely to be taken
as a fresh application.
Pre-filing consultation may not be necessary
for new APA.
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There would be a two-tiered structure to
administer the different types of APAs.
Bilateral/Multilateral
APA
would
be
administered by the CA and his team.
Unilateral APA would be administered by
the DGIT (International Taxation) and her
APA teams.
A Commissioner of Income-tax would head
the Unilateral APA teams and has already
been posted.
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Addl.
Commissioners
and
Deputy
Commissioners have already been posted
at Delhi, Mumbai and Bengaluru.
There is a proposal to hire experts in the field
of Economics, Statistics and Law to be part
of the APA teams.