Advantage of Advance Pricing Agreement - International Taxation - Income Tax

Advantage of Advance Pricing Agreement APA is designed to: Provide tax certainty with regard to determination of ALP of the international transaction with respect to which the APA has been entered into (also called covered transaction ). Reduce the risk of potential double taxation through bilateral or multilateral APA (A taxpayer is thus encouraged to apply for bilateral or multilateral APAs). Reduce compliance cost by eliminating the risk of transfer pricing audit and resolving long drawn and time consuming litigation. Reduce the burden of record keeping , as the taxpayer knows in advance the required documentation to be maintained to substantiate the agreed terms and conditions of the agreement.