The finance ministry on Monday announced rules for multinational companies to seek the benefit of “no-audit-agreements” they sign with the tax department for four prior years as well.
Central Board of Direct Taxes (CBDT) has amended income tax rules to allow a four year roll back of advance pricing agreements (APAs). APAs were introduced to allow MNCs to declare certain value of their cross-border transactions which will not attract an audit for income suppression for five prospective years.
The IT (Third Amendment) Rules, 2015, allow retrospective application of APAs which will benefit the companies to avoid rigorous audits of cross-border transactions and the disputes arising from it. The provision of APA roll back was introduced in the July 2014 Budget but the procedure has been notified now. India has already signed five APAs with individual companies and one bilateral APA with a Japanese company, believed to be Mitsui, and the tax authorities in Japan. These agreements are seen as instruments to ensure tax certainty for MNCs.
The new rules say the value of cross-border transactions to be declared, or the manner to compute it for any of the past years, has to be the same as the one agreed for future years. Any appeals filed by the company or tax department before tribunals and high courts for any of the past years for which APA roll back is sought, will be withdrawn by the respective parties. “This is a welcome move which will provide certainty to taxpayers for four prior tax years and in all provide certainty for nine years i.e five prospective years and four prior years. One can opt for roll back provisions only with respect to same international transactions covered in the forward looking agreement,” said Samir Gandhi, Partner, Deloitte Haskins and Sells.