Indian Advance Pricing Agreement Programme Evaluation and Way Forward

Deloitte Tax Policy Paper 2

The Indian government introduced the Advance Pricing Agreement (APA) programme about six years ago with the objective to provide much needed tax certainty to multinational enterprises (MNEs) operating in India, particularly on their intra-group transactions, and in the process, adopt global best practices. Six years down the line, the programme has attracted considerable popularity with foreign investors as indicated by the fact that nearly 1,000 APA applications have been filed and close to 240 APAs signed.

Credibility of a tax administration depends to a large extent upon the efficacy of its dispute resolution mechanism. Dispute prevention has an equally important role in dispute management. In ensuring that avoidable disputes do not occur, APAs have stood out as a model for dispute prevention. Initially the APA programme did not have roll back provisions, but they were added to the programme after tax authorities realized the overall benefit. All these changes have made the APA programme very popular and successful. But as it happens in any programme, the APA model needs to evaluate itself and recalibrate appropriately.

This tax policy paper, second in line for 2018, is an attempt to evaluate and provide the way forward with an objective to improve and bring robustness to the APA programme. The paper provides more than 22 recommendations, covering procedural aspects of the APAs, post-compliance procedure of APAs, and also on legal and other aspects. Hope the paper brings some important takeaways for tax policy group and taxpayers, and helps in taking a step further to improve the ‘Ease of Doing Business’ - by providing further tax certainty.

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