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).
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.
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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