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Advance Pricing Agreement Annual Report 2019

In recent years and up to March 31, 2019, 44 unilateral applications filed in various years have been transformed into bilateral requests. During the same period, two bilateral requests were transformed into unilateral requests. As a result, a net increase of 42 bilateral applications over the initial number of applications filed increased. For more details, see the following sections. — Reduce or eliminate the risk of transfer pricing adjustment, penalties and interest, as well as the risk of double taxation, in 2019, 121 ABS applications were filed and 120 APAs were closed. The number of AAS closed in 2019 generally corresponds to the number of AAS concluded in recent years. In addition, bilateral ABS continue to be of interest, with Japan (32%), India (12%) and Canada (14%) accounting for 58% of all US bilateral SAAs. The total number of APMA employees has remained fairly constant in recent years, although the mix of economists and team leaders sometimes changes. The number of economists increased in 2019 (16) compared to 2018 (12), the number of team leaders (a mix of lawyers and accountants) increased from 56 in 2018 to 52 in 2019.

In 2019, there were 6 managers and 3 deputy directors. Each deputy director supervised 2 managers who led teams composed of both team leaders and economists. An interesting and important fact concerns the number of years for which the Indian APA program has achieved transfer pricing tax security. In the 271 APAs, which were up to 31 CBDT managed to provide these taxpayers with tax security for 1779 years. This covers 477 years covered by the return period of closed ASAs. Given that valuations and litigation take place every year in India, if we thought that 50% of these cases would have faced transfer pricing adjustments, the APA program has already ended about 890 disputes that would otherwise have clogged ITAs and courts in India. In 2018-19, the average time taken by the CBDT to conclude the 41 unilateral agreements was 45.22 months. This is more than the average time that has been taken in one of the last 5 years. As a result, the average closing time for unilateral SAs in India increased from 31.75 months (as of March 31, 2018) to 32.50 months as of March 31, 2019. This is better than most countries have accomplished. The detailed analysis is presented in the following tables and graphs. The deadlines for the closure of bilateral APAs were then discussed in this report.

In 2018-19, the average time to conclude bilateral APAs increased to 51.82 months. The detailed analysis is presented in the table and graph below. This brings the average time for all bilateral APAs concluded up to March 31, 2019 to 44.32 months, compared to 42.10 months as of March 31, 2018. The table and graph below show the status by country of bilateral notifications initially filed and applications converted unilaterally up to 31 March 2019. It is clear that almost 80% of the total BAPA applications are only 4 countries – the United States, the United Kingdom, Japan and Switzerland. The table and graph below show the number of unilateral APAs that have been completed in the last 5 years. The number of agreements signed in 2018-19 decreased by 30% compared to 2017-18. Even in 2017-18, there was a similar decrease from 2016-17. The reasons for this slowdown have already been mentioned in this report. Announcement 6 reflects the tax authorities` relentless focus on service agreements with related entities, intangible assets and transactions related to intangible assets. Generally speaking, companies facing extensive and complex agreements involving this type of transaction typically face an increase in transfer pricing risks….

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