India and the UK have signed three Bilateral Advance Pricing Agreements (APAs) in order to have a smooth tax regime between the two and reduce litigation arising out of transfer pricing issues.
These Agreements are a result of the understanding reached with the Competent Authority of United Kingdom (UK) some time ago.
The Competent Authorities of India and UK had earlier exchanged mutual agreements amongst them under the Mutual Agreement Procedure (MAP) Article of the India-UK Double Taxation Avoidance Convention (DTAC).
These three pacts cover international transactions in the nature of payment of intra-group service charges and pertain to the telecom industry. They also have a roll-back provision.
With this, India and the UK have concluded five bilateral APAs and some more would be concluded in the near future. The total number of bilateral APAs concluded so far by the Central Board of Direct Taxes (CBDT) is seven.
The APAs are also meant to address complex transfer pricing issues in a fair and transparent manner.
Rollback of APAs was announced in the Budget in July 2014 to provide certainty on the pricing of international transactions for four prior years (rollback years) preceding the first year from which APA is to be applicable.