Unilateral APAs It is possible, however, that a taxpayer can negotiate a unilateral APA in which only the taxpayer and the IRS participate. In this case, both parties are only negotiating an appropriate TPM for U.S. tax purposes. Where the taxable person is involved in a dispute with a foreign tax authority concerning the transactions covered, he or she may remedy the dispute by requesting the competent authority of the United States to initiate a mutual agreement procedure. This obviously presupposes the entry into force of an income tax agreement applicable abroad. An advance pricing agreement (APA) is a prior agreement between a taxable person and a tax department on an appropriate transfer pricing method (TPM) for a number of transactions that are being negotiated over a given period (so-called “hedged” transactions). An APA provides a guarantee as to the tax outcome of the taxable person`s international transactions. The recently signed agreements are five unilateral APAs signed by CBDA for five years. The agreements set the price of subcontracting for covered international transactions concluded by taxable persons. These agreements cover a range of international transactions, including interest payments, corporate guarantees, non-binding investment advice and order manufacturing. The agreements cover various industrial sectors, including pharmaceuticals, telecommunications, exploration and financial services. For Prelims and Hands: APAs – Meaning, characteristics and meaning. Suppose a US company inc.
based in the US buys goods for 100 rupees and sells them for 200 rupees to its related Indian company, India Inc., which, in turn, sells 400 rupees on the open market in India. If A had sold it directly, he would have made a profit of 300 rupees. But by being guided by B, he limited it to 100 rupees, which allows B to appropriate the credit. The transaction between A and B is voluntarily organized and is not determined by market forces. The profit of 200 rupees is thus transferred to country B. The commodity is transferred at an arbitrary or dictated price (transfer price) (20000 rupees), but not at the market price (400 rupees). . . .