Rollback Of Advance Pricing Agreement

The scheme aims to ensure the security of transfer pricing payers by defining pricing methods and setting prices for international transactions in advance. In many countries, the APA regime provides a „backtracking” mechanism for the handling of DLP cases relating to transactions conducted in the run-up to the APA. The „backtracking” provisions deal with the applicability of the ALP or ALP determination method for international transactions already carried out in a period prior to the APA period. However, the „backtracking” discharge is granted on a case-by-case basis under certain conditions. The provision of such a mechanism in Indian law would also result in a reduction in the major disputes currently underway or likely to arise in the future with respect to transfer pricing issues. An applicant may apply for the withdrawal requirement even if the agreement was reached before January 1, 2015 or in an APA application before January 1, 2015. In such cases, the applicant was initially required to apply for a withdrawal plan on or before March 31, 2015. However, since the window of opportunity for filing back-up applications was only 16 days, the CBDT issued a press release specifying the extension of the filing period for return forms until June 30, 2015. Formal communication in this regard is expected.

Section 92CC of the Income Tax Act, 1961 authorizes the Central Direct Taxes Council („CBDT”) to enter into a pre-price agreement (APA) with each individual. The APA is essentially a contract between a tax payer and the tax authorities that pre-defines the length pricing method („ALP”) or defines how the ALP should be determined with respect to transactions between a subsidiary and its foreign parent company. The agreement is valid for up to five consecutive years, as outlined in the agreement. CBDT issued this clarification in response to taxpayer requests regarding the availability of the backtracking system with respect to bilateral APP applications for the APA period in early 2017-18. The revised tax agreement with Korea provides that taxpayers will be able to submit bilateral pre-price agreements and return rules to settle transfer pricing disputes from April 2017, as announced today by CBDT.

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