India: Five APAs signed, transactions involving management cross-charges

India: Five advance pricing agreements (APAs) signed

The Central Board of Direct Taxes (CBDT) on 30 March 2017 signed five unilateral advance pricing agreements (APAs), involving transfer pricing issues for transactions of management cross-charges. The five APAs are signed for a period of nine years each (i.e., five future years and four rollback years).

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The concept of management cross-charges is a key litigious issue globally, placing considerable emphasis on the benefits derived from services and cost allocation factors used by the service provider. The APAs signed by the CBDT entail a great level of subjectivity, in terms of multi-dimensional flow of services and charges—showcasing need benefit analysis and explaining cost allocation methodology. Very few APAs have been signed in the domain of management cross-charges. 

KPMG observation

The conclusion of the five APAs may foster positive sentiments among foreign investors in India and encourage investors to opt for the APA route in order to obtain a certainty on their transfer prices. With the conclusion of the APAs, the Indian APA authorities have clearly expressed they are keen on resolving potentially large disputes.

 

Read a March 2017 report [PDF 266 KB] prepared by the KPMG member firm in India

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