The government has signed five more advance pricing agreements with multinational firms. Of these, three are new agreements while two were renewals, according to consulting firm EY, which was involved in three of the deals.

An Advance Pricing Agreement, or APA, is essentially a negotiated deal between a taxpayer and the tax authorities that sets out the method for determining the transfer pricing pertaining to transactions between a subsidiary and its foreign parent. The agreement relates to pricing of assets, tangible and intangible, services and funds that are transferred within an organisation in a cross-border transaction.

“The three firms were from information technology enabled services and pharmaceuticals,” according to Vijay Iyer, partner and national leader, transfer pricing, EY. He refused to disclose the name of the firms.

India had introduced the APA regime in 2013-14, which is gaining traction.

“A non-adversarial tax regime is kicking in. The Central Board of Direct Taxes signed five more APAs on Wednesday to take the count of total filings to 48. The momentum of APA closures has picked up now and few APAs are getting signed every month. This is a message to tax payers that CBDT is fully committed to the non-adversarial approach to tax administration,” Iyer said.

CBDT had recently issued new instructions on transfer pricing, in a bid to ease the tax regime for MNCs operating in India.

“It (CBDT guideline) attempts to restrict the audit of taxpayers to high risk cases where the quantum of adjustments in the past year has been at least Rs 10 crore. Quite a few honest taxpayers may be spared the pain of transfer pricing (TP) audits, indicating the government’s taxpayer-friendly approach. The CBDT has consciously chosen to let go of taxpayers who have honestly reported transactions and where the quantum of past TP adjustments is less than Rs 10 crore,” Mr Iyer added.