India's apex direct taxes body has said it will accept transfer pricing applications for mutual agreement procedure (MAP) and bilateral advance pricing agreement regardless of presence of a specific provision in the double taxation avoidance agreements (DTAAs).
Tax experts said it showed the country's commitment towards ease of doing business.
The Central Board of Direct Taxes said it had received a number of references if transfer pricing MAP cases and bilateral advance pricing agreements (APAs) applied when the associated enterprise (AE) of the Indian entity is resident of a country with which India has entered into a DTAA but the agreement does not contain a provision for these.
“The matter has been examined by the CBDT and it has been decided to accept transfer pricing MAP and bilateral APA applications regardless of the presence or otherwise of Paragraph 2 of Article 9 (or its relevant equivalent Article) in the DTAAs," the statement said. Tax experts welcomed the clarification.
“The government has taken many steps for early resolution of disputes and provide certainty and clarity to the tax payers in the recent past....Now, this should encourage tax payers to come forward for bi-lateral APA’s as well where this article is not there in the respective tax treaty”, said Vikas Vasal, national leader-tax at Grant Thornton India LLP.
A few treaties have this article while others do not have. Authorities were taking a strict view and not accepting such applications where this specific article was missing. Now it has been clarified that India will take a more liberal interpretation.
Kunj Vaidya, leader, transfer pricing, at PwC India, said this is a big step to showcase our commitment towards this program and it will surely further ease of doing business in India. Multinationals from two important trade partners, France and Germany, would be the immediate beneficiaries of move
Nitin Narang, executive director, transfer pricing, at Nangia & Co LLP, said, “A clarification of India’s stand clearly spells out that the government is seriously examining the concerns raised by the multinational enterprises and taking steps to resolve it. It also reinforces the government’s focus on improving India’s ranking on ease of doing business index.”