Advance pricing arrangement

Tax Glossary Definition

Advance pricing arrangement

Advance Pricing Arrangement (APA) – A structured agreement between a taxpayer and one or more tax administrations that defines in advance the transfer pricing principles, comparables, and adjustments applicable to specified cross-border transactions for a set future period. It enhances tax certainty and helps prevent transfer pricing disputes.

Example: A multinational group signs an APA with the Indian tax authority to pre-determine the arm’s length pricing method for intercompany service fees for the next five years.

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