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 length return to constituents of the various MNE group, depending on the performed functions, the risk involved, assets employed, etc. The process of the Advance Pricing Agreement also pursues to do away with these tax risks.
  • Decreases compliance costs – Minimizes compliance costs and expenses relating to audit and demands over the Advance Pricing Agreement term by resolving long-drawn litigations, eradicating the risk of transfer pricing audit, and reducing timely litigations.
  • Reduces the load of keeping records – Minimizing the burden of keeping a record as a taxpayer by ensuring have a note of all of the documents and compliances required in advance to be upheld to substantiate the terms and conditions of the agreement.
  • Competent authority guides in negotiating – Competent authority analyst with knowledge of negotiating with the other country guides the case from the outset and allow one competent authority to act as a counterbalance for another.

 How Advance Pricing Agreement consultants can help you?

APA Consultants like ASC Group helps in assistance of evaluating & forming of strategy Assistance in the preparation and filing of an application with the Tax Authority, Assistance in representing before the tax authorities for negotiations and other matter related to Advance Pricing Agreements (APA agreement), Assistance in compliances after getting the agreement signed with the CBDT, etc.

Location: India

Comments

  1. HisabkitabSeptember 22, 2023 at 12:36 AM

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