India-Korea revised tax treaty: APA with rollback provision from 1 April

Under revised India-Korea DTAA, taxpayers can file for bilateral advance pricing agreement, along with a rollback provision, for settling transfer pricing disputes


India had revised the three-decade-old Double Taxation Avoidance Agreement (DTAA) with South Korea in 2015 and the amended pact came into force from 12 September 2016. Photo: AFP
India had revised the three-decade-old Double Taxation Avoidance Agreement (DTAA) with South Korea in 2015 and the amended pact came into force from 12 September 2016. Photo: AFP

New Delhi: The revised tax treaty with South Korea provides for taxpayers to file for bilateral advance pricing agreement, along with a rollback provision, for settling transfer pricing disputes from April 2017, the tax department said on Friday.

India had revised the three-decade-old Double Taxation Avoidance Agreement (DTAA) with South Korea in 2015 and the amended pact came into force from 12 September 2016.

In a statement on Friday, Central Board of Direct Taxes (CBDT) clarified that under the revised treaty beginning April 2017, applications for bilateral Advance Pricing Agreement (APA) involving international transactions with associated enterprises in Korea can be filed along with request for the rollback provision.

“Such requests for the rollback provision shall be processed in accordance with the provisions of the Income Tax Act and the applicable I-T rules. Inclusion of the rollback provision in such bilateral APAs would also be subject to the applicable regulations in Korea,” the CBDT said.

The revised tax treaty incorporates Para 2 in Article 9 (Associated Enterprises). “Article 9(2) of the revised India-Korea DTAA provides recourse to the taxpayers of both countries to apply for Mutual Agreement Procedure (MAP) in transfer pricing disputes as well as apply for Bilateral APAs for APA period beginning 2017-18,” the CBDT said.

The APA scheme was introduced in the Income Tax Act, 1961, in 2012 and the “rollback” provisions for dispute redressal were introduced in 2014. The scheme seeks to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance.

The CBDT has issued the present clarification in response to the queries received from taxpayers regarding availability of the rollback provision in respect of bilateral APA applications for the APA period beginning 2017-18.

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