Articol de: Nilanjan Nag, Transfer Pricing Manager, PKF Finconta
Case study
In order to put in context some of the benefits of an APA program, summarized below are some facts of a BAPA that was entered into between Japan and India. The company in question had diverse business interests in the areas of infrastructure and energy. The company elected to take the APA route as the group had undergone business restructuring and had related party transactions involving payment of royalties for use of intangibles and financial transactions.
The principal reason for the BAPA in the above case was to avoid protracted litigation. The BAPA will provide certainty to the company and avoid conflicts over sharing of taxes between India and Japan and reduce the transfer pricing disputes. Further, this BAPA would determine the methodology for calculating arm’s length price for the next five years. The margins declared as per agreed approach will not be disputed by tax officers.
Conclusion
Recent changes in the global transfer pricing enforcement environment have made APAs generally more desirable. However, the decision by a company to pursue an APA should entail a review of the taxpayer-specific factors that make an APA more or less appropriate and the benefits sought by the company through the APA process.
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