What is Advance Pricing Agreement - International Taxation - Income Tax

What do you mean by Advance Pricing Agreement An APA is an agreement between the Board and the person(taxpayer), which determines, in advance, the ALP or specifies the manner of the determination of ALP (or both), in relation to an international transaction. Hence, once an APA has been entered into with respect to an international transaction, the ALP with respect to that international transaction, for the period specified in the APA, will be determined only in accordance with the APA. The APA once entered into shall be binding on the person as well as the Commissioner of income tax (and his subordinate income tax authorities) having jurisdiction over such person and such transaction. The term of APA can be a maximum of 5 years. There is no minimum period. However, looking into the time, money and efforts that are expected to be spent before entering into APA, it is likely that the application for APA would normally be for a term which is not less than at least three years. Sections 92CC(6) and 92CC(7) contain circumstances under which the APA Will not be binding or can be declared void ab-initio. Rule 10Q and Rule 10R contain circumstances under which the APA could be revised or cancelled.