Key Features of Advance Pricing Agreements

An APA (Advance Pricing Agreements) is an agreement between the tax authority and taxpayer on the transfer pricing of upcoming intercompany transaction to avoid needless litigations on the stated arm’s length. On 2012 budget, the government of India introduced Advance Pricing Agreement provisions and in this situation, both the tax authority and taxpayer mutually decides on the transfer pricing methodology for covered transaction on decided time. APA is an effective tool used in several countries with established transfer pricing regimes to avoid potential disputes in a cooperative manner.


Key features of APA (Advance Pricing Agreements) are:

  1. The arm’s length price in terms of transactions is determined according to the Advance Pricing Agreement that is entered into board and person.
  2. The validity of Advance Pricing Agreements must not exceed 5 year successively. 
  3. APA shall be obligatory on:

  • The assessee based on the transaction for which the Advance Pricing Agreements (APA agreement) has been entered.
  • The Commissioner and authorities subordinate in respect of such assessee and such transaction.

    4. Advance pricing agreement is not mandatory if there is a change in the facts or law that is not included on the agreement.
    5. The Board has the powers to declare any such agreement to be canceled, if it finds that such agreement has been entered into by fraud or misrepresentation of facts.

Section 92C (9) gives the powers to the Board to recommend a scheme listing the form and procedure, and manner to be followed based on APA.  

Location: India

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