CBDT resolves 100 transfer pricing rows with US firms

Tax officials have resolved over 100 transfer pricing disputes with American multinational companies using the mutual agreement procedures (MAP) as the Centre tries to create an environment of tax certainty and encourage foreign companies to do business in India.

“More than 100 cases have already been resolved and some more are expected to be resolved before the end of this fiscal,” said the Central Board of Direct Taxes on Thursday. It added that there are about 200 past transfer pricing disputes between the two countries in information technology services and information technology enabled services.

Pact with the US India had signed a Framework Agreement with US revenue authorities in January last year to resolve such disputes. “This agreement was finalised under the MAP provision in the India-USA Double Taxation Avoidance Convention,” said the CBDT.

MAP is an alternative route that allows MNCs to efficiently resolve transfer pricing disputes with tax authorities and eliminates double taxation. A majority of US-headquartered IT companies have had transfer pricing disputes with domestic tax authorities on revenues from their Indian operations.

“The success of the framework agreement in a short period of one year has led to US revenue authorities opening up their bilateral advance pricing agreement (APA) programme to India,” said the CBDT, adding that the US is likely to begin accepting bilateral APA applications soon.

India is also working out MAP programmes with other countries such as Japan and the UK, it said. APAs were introduced in 2012 in India and remove the element of uncertainty to taxpayers in transfer pricing by specifying the method of pricing and setting the prices of international transactions in advance.