To the much needed relief of the multinational companies, the tax authorities recently announced to sign more advance pricing agreements (APAs) with multinational companies in the current fiscal year. R K Tewari, the chairman of Central Board of Direct Taxes (CBDT) quoted “We will be signing more APA’s before March 31”.
Introduced in 2012, APA consists of coming together of taxpayer and tax authority to set a transfer pricing methodology to standardize the pricing of goods-and-services transactions in the future. With APA programme on its way, these companies can finally expect to swim out of the deep financial troubles caused to them by transfer pricing I-T suits.
Last year, multinational giants like Shell, Vodafone, Nokia and IBM were hammered with hefty fines and penalties regarding the violations of the transfer pricing norms. The figures ran in thousands of crores of rupees. It should not come as a surprise that with this announcement, I-T department received more than 146 applications from companies for getting advance pricing agreements inked with the authorities.
Over the past few years, transfer pricing has been the bottleneck in the international trade and business. Tax experts believe that this move is going to be a big step and is expected to bring more predictability and transparency in the transfer pricing process. Foreign investors will look forward to sign more APAs in the upcoming future to mitigate transfer pricing adjustment risks in their businesses.