Measures to strengthen Advance Pricing Agreement programme for tax certainty

Measures to strengthen Advance Pricing Agreement programme for tax certainty

March 9, 2022


Taxation & Accountancy

We thank you for inviting our Chamber for the Post-Budget discussion series with stakeholders from trade and industry at Mumbai on 21st February 2022. Your message that the government is looking into the issues affecting taxpayers was truly reassuring.


One of the issues we would like to highlight is the need to improve the current alternate dispute resolution mechanisms, especially the Advance Pricing Mechanisms (APA) programme for transfer pricing matters which, until recently, has been very successful. Each APA requires a complex analysis and we commend the Department for creating a global benchmark. We understand that as of today, more than 375 APAs have been concluded, which is a great achievement.


In recent years, however, the progress of APAs has slowed down considerably, resulting in a large pendency of cases. As per the latest data available, more than 760 APA applications, out of 1165 filed, are still under processing. Many more APAs have been filed as of 31 March 21 and later in this year adding to the existing inventory. The limited number of resources deployed in the APA office, long time gap between processing of APA file to conducting site visits, periodic transfers of APA officers and multiple levels of approval within the APA program have slowed down the decision-making framework.


Madam, we strongly feel that certain measures to strengthen APAs can bring immense value both to the taxpayer and tax department. Some of the key measures are:

· Adopting a ‘framework’ approach for resolving APA cases with low complexity/ risk such as cases involving IT / ITeS transactions

· Allocating additional and specialist resources to the APA team

· Using online media for preliminary consultations, site visits and negotiations.

· Creating a special window – ‘Accelerated APA’ – for clearing up old cases

· Providing quick timelines for different APA phases to conclude APA in a timely manner

· Rationalising safe harbour rules to reduce the load on APAs (which are perceived as the only option for tax certainty)

· Keeping the regular TP assessment in abeyance during the APA process, in line with the international practices.


Attached, for your kind consideration, is a detailed note that outlines the reasons for APAs slowdown and our suggestions for both immediate measures and structural reforms that may be taken to strengthen this programme.

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