(Updated 2/1/2016) Reassured by the successful settlement of numerous long-pending transfer pricing disputes, the US competent authority has agreed to soon begin negotiating bilateral advance pricing agreements (APAs) with India.
Over 100 transfer pricing disputes involving the US and India have been settled since a framework agreement was put in place by the countries last year, India’s Central Board of Direct Taxes (CBDT) said in a statement on Thursday.
“The success of the framework Agreement in [the] short period of one year has led to the US Revenue Authorities opening up their bilateral APA programme to India. The USA is expected to begin accepting bilateral APA applications shortly,” the CBDT said.
The announcement appears to mark the end to a dark chapter in the history of US/India relations. In early 2013, just after India launched its APA program, the US competent authority publicly declared a halt in negotiations with their Indian counterparts on transfer pricing matters. The US claimed that the Indian side was not engaging in principled negotiation during mutual agreement procedure discussions. Since that time, the US has refused to negotiate bilateral APAs with India.
The transfer pricing framework was put in place by the countries last year to resolve over 200 pending transfer pricing cases in the information technology services and information technology enabled services segments.
While the Indian government expected last August to settle all of the cases in 2015, some cases still remain unresolved. The CBDT said that more cases will be settled by the end of this fiscal year.
India has so far signed one bilateral APA: a five year agreement with Japan and a Japanese company, agreed to in 2014.
Update (2/1/2016): US to accept Indian bilateral APA applications beginning February 16. The US IRS, on February 1, confirmed that, beginning February 16, the US competent authority will accept applications for Indian APAs, citing the successful resolution of cases under of the India/US framework agreement.
The US will accept applications “covering information technology-enabled services, software development services, or other issues for whose resolution transfer pricing principles are relevant,” the IRS said.
“We appreciate the efforts of the Indian Competent Authority and his team, as well as the IRS team, for working to reach common understandings and procedures for resolving differences fairly,” said IRS Commissioner John Koskinen. “Multi-national firms operating in both the US and India are the beneficiaries of this effort,” he said.
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US confirms it will accept Indian bilateral APA applications
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