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.

For businesses entering Bilateral Advance Pricing Arrangements (BAPA), expert income tax advisory services are essential to ensure compliance with transfer pricing norms, minimize double taxation risks, and maintain proper documentation aligned with international tax regulations.

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.

Companies dealing with cross-border transactions can benefit from professional income tax consultation to structure intercompany pricing policies, manage regulatory scrutiny, and align profit margins with the arm’s length principle under BAPA frameworks.