Advance Pricing Agreement

It is an agreement between taxpayers (corporates) and the central tax authority (in case of India it is CBDT)

It determines transfer pricing methodology for determining the value of assets and taxes on intra-group overseas transactions.

Transfer pricing is referred to the fixing of the price for goods and services sold between related legal subsidiaries (entities) within an enterprise.

It introduces certainty in tax laws and reduces compliance cost

It makes tax regime investment friendly

It aims to avoid disputes between taxpayer and tax regulator.

The APA Programme was introduced by Finance Act, 2012 with a view to provide a predictable and non-adversarial tax regime and to reduce litigation in Indian transfer pricing arena. Rollback of APAs was announced in the Budget in July 2014.

An APA is usually signed between taxpayer and central tax authority on an appropriating transfer pricing methodology for determining the value of assets and taxes on intra-group overseas transactions.

An APA can be entered into for a maximum of 5 years at a time.

It seeks to introduce certainty in tax law by reducing compliance costs and make tax regime investment friendly.

It provides certainty to taxpayers regarding transfer pricing that aim to avoid disputes between taxpayer and tax regulator.

Boost to economy and ease of doing business.

Provide alternative path to the investors with rollback provision to reduce litigation.

Strengthen Government’s mission of fostering a non-adversarial tax regime.

Introduces certainty in tax law by reducing compliance costs and make tax regime investment friendly.

Provides certainty to taxpayers regarding transfer pricing to avoid disputes between taxpayer and tax regulator.