- An APA is a contract between a taxpayer and at least one tax authority.
- It specifies the pricing method for related-company transactions.
- It is usually for multiple years.
- Significance in International Taxation:
- Helps taxpayers voluntarily resolve transfer pricing disputes proactively.
- Provides certainty to taxpayers.
- Reduces disputes and litigation costs.
- Enhances tax revenues.
- Makes the country an attractive destination for foreign investments.
- Agreements are binding on both taxpayer and government.