What is an Advance Pricing Agreement (APAs)? 

According to Indian Tax Laws, it is an agreement between the Central Board of Direct Taxes (CBDT) and any person, which determines, in advance, the arm’s length price or specifies the manner of the determination of arm’s length price (or both), in relation to an international transaction.

The Organization for Economic Co-operation and Development (OECD) in its transfer pricing guidelines, defines an APAs in the following words –

“An arrangement that determines, in advance of controlled transactions, an appropriate set of criteria for the determination of the transfer pricing for those transactions over a fixed period of time”. 

Once an APA has been entered into with respect to an international transaction, the arm’s length price with respect to that international transaction, for the period specified in the APA, will be determined only in accordance with the APA.

Objective of APAs 

APAs can be applied for various international transactions: 

  1. To purchase or sale of raw materials, finished goods,
  2. To provide services,
  3. To extend financial assistance,
  4. To transfer and use of tangible/intangible assets, etc.


The taxpayer may have to make certain prospective disclosures like prospective new technology, future business, strategies etc. Therefore, an APA is generally designed in such a way that ensures confidentiality to any other persons or any other government department who are not authorized to receive that particular information.

Most of the countries have suitable provisions relating to confidentiality of the information provided by the taxpayers in their APA agreement.

Latest Developments 

The Central Board of Direct Taxes (CBDT) entered into Five Unilateral Advance Pricing Agreement with Indian taxpayers during June, 2017. A Bilateral Advance Pricing Agreement (involving United Kingdom) was also signed during the month.

The APAs signed in June, 2017 pertain to healthcare, information technology and gaming/animation (media) sectors of the economy.

Journey of Advance Pricing Agreements Scheme…….
S. No Financial






1.       2013-14 05 00 05
2.       2014-15 03 01 04
3.       2015-16 53 02 55
4.       2016-17 80 08 88
5.       2017-18 09 01 10
  Total 150 12 162

 The Author is a budding tax law and may be reached @ shreetaxchambers@bsnl.in

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