CBDT Sees Record High APAs In FY24

Typically, an APA helps make the tax treatment of transactions transparent for both the parties involved, namely, the tax authority and the taxpayer

The Central Board of Direct Taxes announced on Tuesday that it registered a massive interest in Advance Pricing Agreements (APAs) from taxpayers in the 2023-24 fiscal year (FY24). The statutory body said that it entered into a record high 125 APAs with taxpayers in FY24. 

Issuing an official release dated April 16, 2024, the CBDT said from these 125 APAs, 86 were unilateral APAs, while 39 were bilateral APAs. The number of the agreements signed remained the highest-ever signings seen in any particular fiscal year ever since the launch of the APA programme. 

Relatively, 95 APAs were signed in the 2022-23 fiscal year (FY23), marking an increase of 31 per cent in the agreements signed in FY24. With the signings, the overall APAs executed since the launch of the programme increased to 641, including 506 unilateral APAs and 135 bilateral APAs. 

Further, the number of bilateral APAs signed in FY24 also registered the record of the highest ever signed in a single fiscal year till date. The bilateral APAs were executed after India entered into mutual agreements with its treaty partners such as Australia, Singapore, the US, the UK, Canada, Denmark, and Australia. 

What Is APA?

Typically, an APA helps make the tax treatment of transactions transparent for both the parties involved, namely, the tax authority and the taxpayer. A bilateral APA helps make this agreement between two tax administrations and the concerned taxpayer.

Notably, the APA scheme plans to assure taxpayers and provide them certainty with regards to transfer pricing. The scheme outlines the pricing methods and also evaluates the arm’s length price of global transactions in advance for a maximum of five years ahead. 

The scheme also allows taxpayers to rollback the APA for four preceding years, in turn, adding stability for a period of nine years overall. Bilateral APAs help by guarding the taxpayers against expected or actual double taxation. 

The APA programme has helped realise the Indian government’s agenda of promoting ease of business, specifically for Multinational Enterprises which see a majority of cross-border transactions within their group entities.