US And India Conclude Terms On Advance Pricing Agreement

The finance ministry of India informed that India and the US reached a deal on the terms and conditions of the first bilateral advance pricing agreement (APA) that will contribute to a more tax friendly environment for US multinationals. The two countries also resolved 108 pending transfer pricing disputes. 

Resolving 108 Tax Disputes

One month ago, India and the US held a meeting in Washington regarding the Bilateral Competent Authority MAP or Advance Pricing Agreement (APA). On November 17, the finance ministry of India informed that these long pending cases of 108 tax disputes involving Rs 5,000 crore were resolved through bilateral advance pricing agreements (APA). 66 MAP cases relating to Transfer Pricing issues and 42 MAP cases relating to Treaty Interpretation issues were agreed to be resolved successfully.

"The speedy resolution of cases and agreement on Bilateral APA would really be a positive factor in creating a conducive atmosphere for investments and business by US Companies in India," the finance ministry informed.

Transfer Pricing Disputes

The resolved cases involved disputes regarding transfer pricing adjustments made to the international transactions in the nature of payment of royalty, management fees, cost contribution arrangements, engineering design services, contract R&D services, investment advisory services, Marketing Support Services, Software Development Services.

Permanent Establishment Disputes

The treaty interpretative issues were in the nature of presence of permanent establishment in India and profit attribution to such PEs, disputes pertaining to royalty income versus business income of foreign companies. 

Sources: Business Standard, The Economic Times, Telegraph India, The Financial Express

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