Recently the Central Board of Direct Taxes (CBDT) of India published a comprehensive APA Guidance Booklet concerning India’s advance pricing agreement (APA) program, detailing the procedural aspects of unilateral, bilateral or multilateral APA applications.
According to the guidance:
- A unilateral APA application can be converted into a bilateral APA before finalization of the APA.
- In case bilateral/ multilateral negotiations fail, the taxpayer has an option to choose a unilateral APA or even a multilateral APA not involving the country with which agreement could not be reached.
- The taxpayer can request unilateral APAs for some transactions, and bilateral APAs for others, since an APA is transaction specific.
- The choice of selecting the bilateral APA or unilateral APA lies with the taxpayer. The tax administration has no particular preference for bilateral APAs over unilateral APAs.
However, APA office cannot refuse a request for pre-filing consultation. If a taxpayer decides to cover certain transactions rather than others and if one transaction is intrinsically linked with another or several others in a manner that it cannot be benchmarked independently, then the taxpayer may need to cover all transactions.
