What is the Advantage of an Advance Pricing Agreement?
APA (Advance Pricing Agreement) is an agreement between a tax authority and a suitable transfer pricing methodology for an agreed transaction over a specified period of time. The Advance Pricing Agreement offers a better guarantee of transfer pricing methods and is advantageous in providing certainty and unanimity of approach. Merits of an APA (Advance Pricing Agreement) Mechanism Certainty on high-risk transactions– Advance Pricing Agreement is deliberated to as an approach to reduce the risk of a transfer pricing adjustment and gives certainty and guarantee via the negotiation process. An Advance Pricing Agreement can be commenced by an industry having complicated or risky transactions very often. Avoids double taxation – Double taxation is the most complex issue faced by multinational companies. The goods and services pricing by multi-national transactions is generally administered and regulated by a global pricing policy. The global pricing policy makes sure to offer an arm’s le