Bilateral advance pricing arrangement (BAPA) APA

Tax Glossary Definition

Bilateral advance pricing arrangement (BAPA) APA

Bilateral Advance Pricing Arrangement (BAPA) – A formal agreement among a taxpayer and the tax administrations of two countries that establishes in advance the transfer pricing approach to be applied to specified cross-border dealings between related enterprises. The arrangement aims to reduce the risk of double taxation, reinforce adherence to the arm’s length principle, and offer predictability for future tax evaluations.

Example: For instance, an Indian parent company and its U.S. affiliate may negotiate a BAPA with both tax authorities to predefine the acceptable profit margin for intercompany service transactions.

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