Manpower shortage holds back advance pricing deals

THE GOVERNMENT'S PLAN to fast-track negotiations relating to Bilateral Advance Pricing Agreements (BAPAS) is being thwarted by the lack of requisite expertise and manpower to conclude the process, sources aware of the matter told FE.

- PRIYANSH VERMA

In FY23, the Central Board of Direct Taxes (CBDT) signed 32 BAPAs, and this year, the number is unlikely to be any higher, the sources said.

Currently, the CBDT is negotiating the agreements with its counterparts in the US, the UK, South Korea, Japan and Finland, but the process is moving at a snail's pace.

Launched in 2012,Advance Pricing Agreements (APAs) are pacts signed by two parties - taxpayer and tax administration - in order to determine the transfer pricing methodology for pricing the taxpayer's cross-border related party transactions for future years, and to prevent any dispute arising from it.

They are effective for a maximum period of five years.

APAS can be bilateral, involving CBDT and the tax authorities of another country, or unilateral, which involves the CBDT only. In unilateral APA, the CBDT - without engaging with its foreign counterpart - signs the pact with a domestic firm (taxpayer), undertaking transfer pricing transactions with its offshore entity.