Transfer Pricing: The Law And Practice Of Advance Pricing Agreements (APA)

Introduction

Taxation is a concept which is based on the sovereignty of nations, whereby each nation taxes income derived from businesses within its sovereign control. Universally, the world recognises each nation’s right to tax the economic activity within its jurisdiction.1 International issues are addressed, to some extent, through a number of bilateral treaties, many based on an international model2 or convention, mutual understandings, and practice. Taxation of international transactions by individual nations often results in confusion, disagreement, double or multiple taxation of same income,3 and, also taxable income which is not taxed by any of the nations. Concurrently, the fragmentation of taxation of international transactions into a number of national systems provides a significant opportunity to business entities for tax avoidance, evasion, or mistake.4

The world’s taxing authorities are worried about multinational corporations using intercompany transactions to shift earnings among subsidiaries to avoid taxation.5 Similarly, corporations have been concerned about double taxation that is, paying taxes on the same income to two or more countries.6

Transfer pricing is the term used to describe the methods by which multinational taxpayers account for transactions among subsidiaries and divisions in different countries.7 Tax authorities want these companies to transact at an ALP. All over the world, transfer pricing is considered as a very significant issue which requires thorough examination, documentation and indepth understanding of tax rules prevailing in different countries and international organisations like OECD. Around 60 per cent of global trade is between companies in the same group. The current transfer pricing regime in India8 is heavily burdened by litigation between MNC’s and Tax Authorities. The primary cause of litigation is due to determination and uncertainty of the ALP9 in international transactions. When tax authorities do not agree with a company’s ALP, they ‘adjust’ the price. If the company disagrees with the ‘adjustment,’ it can appeal the decision. The company can also approach a high court to resolve the dispute.

In the recent past Income tax disputes for both tax authorities and taxpayers have been proved as a reason of distress. On comparing the data of March 31, 2009, and March 31, 2011, the amount involved in tax disputes almost doubled to Rs. 4.05 trillion. That amount is so huge that it is enough to cover the government’s subsidies for two years. It is a fact that transfer pricing is the single-largest cause of litigation for both foreign and Indian multinational companies. According to Ernst & Young the estimated outstanding amount adjusted by tax authorities in transfer pricing cases is around ` 1 trillion. According to Pricewaterhousecoopers (Pwc) almost all adjustments lead to litigation.10 In 2011, PwC estimated that 70 per cent of outstanding transfer pricing disputes in the world originated in India and in the last five years, approximately 500 transfer pricing cases have been decided by Indian tribunals. The Indian government took various measures like Dispute Resolution Panel,11 Safe Harbour12 and Mutual Agreement Procedure13 (MAP) but these methods failed to solve the increasing litigation between corporate and tax authorities.

As an initiative to reduce the TP litigation in India the advance pricing agreement (APA)14 was introduced15, in exercise of powers conferred under Section 92CC(9) of the IT Act, 1961 read with Section 295, the CBDT amended the Income Tax Rules. In furtherance of this amendment Rule 10F to 10T and Rule 44GA are inserted for the purpose of international transactions.

APA is an agreement16 between the board and the taxpayer, which determines in advance, the Arm’s Length Price or specifies the manner in which Arms Length Price is to be determined, in relation to an international transaction.17

The driving force for introducing an APA is that it delivers certainty and accuracy, for both the taxpayer and the tax authorities, of the tax liability of the taxpayer’s international transactions. A taxpayer by agreeing in advance to the ALP methodology to apply to the international transactions18 covered by the APA eliminates the prospects of arbitrary tax adjustments by tax authorities. An APA removes an audit threat and delivers a particular tax outcome based on the terms of the agreement, and substantially reduces compliance costs. This enables a more efficient and effective management of transfer pricing compliance requirements by bringing fairness, simplicity and efficiency, which may otherwise lead to protracted and disputed dealings between a taxpayer and the tax authorities, including difficulties involved in resolving economic double taxation.

Thus, for a taxpayer, an APA can be an effective tool for better managing the tax risks arising from international transactions. An APA can similarly be an effective tool for better and more efficient administration of the transfer pricing laws. Consequently, APAs provide a win-win situation for all the parties involved.

Indian APA Regime – Analysis of section 92CC 92CD and Rules

“An APA is 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”.

– OECD in its 2010 transfer pricing guidelines

1. Parties to the Contract

In India the APA programme is governed by sections 92CC, 92 CD of IT Act read with Rules 10F to 10T. According to section 92CC (1) of IT Act, the APA will be entered between taxpayer19 and board20 with the prior permission of the central government. Currently, no monetary limit has been prescribed regarding the eligibility and any person is eligible to enter into the agreement who is indulged in an international transaction or contemplating any international transaction. Once the APA comes into force there will not be any adjustments or penalties if taxpayer applies the agreed transfer pricing methodology.

The taxpayer can enter into 3 types of APA namely Unilateral21 APA, BAPA22 and MAPA. A unilateral APA is an agreement which is solely between a taxpayer and a tax authority. When single mutual agreement takes place between the CA of two tax administrations then it is called BAPA. When More than one bilateral mutual agreement is present then it is called MAPA.

A party interested in entering into APA needs to go through mandatory pre- filing23 consultation24 which is not binding on the Board or the Taxpayer. Since the taxpayer is required to reveal important and confidential information during this process, an option of anonymous pre-filing consultation is permitted. Pre-filing process basically aids in determining the feasibility of APA and identify the transfer pricing issues. Pre filing gives an opportunity to both the parties to discuss broad terms of the agreement in detail. Taxpayer is expected to be effectively involved in regular communication with its associated enterprises, ensuring effective information flow to tax authorities. APA programmes require the taxpayer to be prepared for attending meetings between officials and to provide any information whenever required. Once the pre-filing is done then the taxpayer can move ahead with the APA application.25 In case of continuing transactions the application is to be filed before the 1st day of the relevant previous year. In case of remaining transactions the application can be filed at any time before undertaking the transaction.

2. Arms’ Length Price (ALP)

The term “Arm’s Length Price” can be defined as “the price at which a buyer would be willing to buy /avail and a seller would be willing to sell/render a product/service, and where both the transacting parties are not related to one another and the said transaction is free of all/any perceivable conflict of interest”.26 The provisions pertaining to the Arm’s Length Price were embedded27 under section 92 of the Act. The Indian tax authority is motivated to follow the procedures laid down in articles28 of OECD and UN Model Tax Convention.

The major cause of TP litigation is non adjustment of the ALP between taxpayer and CA. It can be explained through the following example:

Suppose India tax authorities have found that the international transaction is not at Arm’s Length and subsequently they proceed to make an adjustment. At this point it may lead to double taxation of the taxpayers income in respect of which adjustment is done because the adjusted income might have already offered for tax in some other country and will now again be subjected to be taxed by Indian tax authorities. Similar situation occurs if foreign tax authorities do not accept the transfer price and make an adjustment. If there is certainty about the transfer price being accepted in both the jurisdictions, the risk of double taxation is eliminated. This is precisely what APA aims for. APA entered between both the jurisdictions and tax-payers provide certainty to a great extent that the transfer price will be accepted and thus the risk of double taxation is eliminated.

Section 92CC(2) specifies that the ALP may be determined by any of the 5 methods prescribed u/s. 92C(1). The other benefit of resorting to an APA is that the taxpayer and tax authority may agree to a methodology29 other than the prescribed methods for determining the ALP, depending upon the commercial nature of the international transaction. This may be quite useful in scenarios where transfer price is set with pure commercial rationale. Tax-payer can negotiate an economic method to justify the set transfer price.

The pre-filing process acts as a key player in determining the appropriate TP method. Pre-filing helps in discussion of TPM, methods, policies, and practices used by the applicant and AE in the past. Also there is analysis and discussions of each TPM, applied or rejected, for each covered transaction. It provides information on accepted or rejected internal comparables. On the basis of such discussions the final TPM is suggested on which APA will be executed.

3. Cost and Time Analysis

Section 92CC(4) prescribes that an APA can be entered for maximum period of 5 years. However the act is silent on minimum duration of an APA. The reason behind such a long period of agreement is justified as APA is a time consuming and resource exhausting method as compared to regular transfer pricing method. In jurisdictions like Japan and USA MAPA it takes a minimum of 14 months and may extend up to 3 years to conclude a unilateral APA. BAPA and MAPA, usually takes even longer because of the level of complexity just by virtue of having more than two tax jurisdictions involved.

4. Binding Nature of Agreement

The agreement shall be binding on the taxpayer30 and the commissioner and31 the tax authorities subordinate to him; however it shall not remain binding on the parties if there is a change in law or facts of the agreement.

5. Termination of Agreement

The agreement can be declared void ab initio if the agreement has been entered by taxpayer using fraudulent means or by misrepresentation of fact’s.32 For termination of such agreement the board may not solely revoke it on its discretion. The board is required to take permission from the Central Government in order to revoke the agreement. Once the agreement is terminated or revoked, the taxpayer will be restored back to such a position as if he had not entered into any agreement.33

On the other hand the rule prescribes that the agreement will not remain binding34 if the parties fail to meet the terms of the agreement35 or if there is a change in the critical assumptions of an agreement. In such a case the agreement can either be revised or cancelled after due notice. If the parties opt for revision of the terms and conditions then the same has to intimate to the concerned taxing authorities. The process of notice ensures that natural justice is being done and the parties don’t go unheard.

However there are chances of litigation if the agreement is rendered void or cancelled without proper reasoning or by arbitrary use of powers by the board. To support this view a US case has been critically examined below:

USA Case Eaton Corp. vs. Commissioner36

Eaton Corporation and IRS37 entered into two advance pricing agreements, first in the year 2004 covering tax years 2001-2005 and then second for renewing the agreement in year 2006.38

The IRS determined that Eaton Corp. did not comply with the terms of the APAs and summarily cancelled the APAs and asserted that the taxpayer owes taxes on over USD 360 million in additional income and levied USD 51 million in penaltie’s39. Eaton and the IRS approached the court to determine the legal standards that will apply if the IRS unilaterally cancels an APA retroactively.

Eaton argued that APAs were enforceable contracts, and IRS must show that they are entitled to revoke the APAs. Eaton argued that they have complied40 with the terms and conditions of the APAs and the IRS had abused its dis-cretion in cancelling them. The IRS countered that it cancelled the APAs under revenue procedures and were administrative determinations. The IRS may revoke an APA due to malfeasance41 or fraud or lack of good faith with respect to compliance with the APA’s terms and conditions.42

Eaton cites that APA is a “binding agreement”43 and has all of the elements of a binding contract44 breach of APA must be analysed using contract principles. The APA is signed by both the IRS and tax-payer’s “authorised representative”.45 In APA general contract principles apply to its interpretation.46 Eaton has not disputed the power of IRS to cancel the APA but argues that the right to cancel the APA is a “condition subsequent” to contract.47 Accordingly, the IRS could cancel the APA only under the specific stated reasons as set forth in the terms of the APA. This is the critical point because if the ability to cancel the contract is a condition subsequent, then the party seeking to cancel the contract, the IRS in Eaton, bears the burden of proving non-compliance.48 This would alter the Tax Court’s typical standard of proof, which generally puts burden of proof on taxpayer to prove that tax deficiency shown by IRS is incorrect.49 The IRS argued that the court cannot “look behind” the notice of deficiency.50 IRS decided to cancel Eaton’s APA occurred before they IRS issued the notice of deficiency.

IRS’s argument is that an APA is a type of administrative determination issued pursuant to section 7805 of the IRC subjected to IRS’s discretion.51 The IRS takes this position because an APA is merely an administrative approach; its decision to cancel the APAs can be overturned only if the IRS abused its discretion in cancelling them.52

Eaton explains that IRS does not have discretion over whether the APAs will, in fact, be cancelled.53 When IRS and Eaton executed the APA, both parties submitted to the limitations imposed upon them under APAs and general contract law. Eaton argues that if the IRS “had discretion to unilaterally cancel an APA, the APA itself would be meaningless.54

The Eaton case is testing the flaws of the APA programme and the question remains unanswered that whether IRS will respect an APA or dismiss it at will. Eaton in its statement has stated that:

“In the last 20 years of APA programme the IRS in no time has publicly asserted that APAs are not binding. Rather IRS consistently asserted that APAs are binding. Had [the IRS] advertised that APAs, contrary to fundamental principles, could be cancelled in [the IRS’s] discretion, subject only to a challenge based on the arbitrary and capricious standard, no taxpayer would have entered into them.”55

The Indian tax authorities should be ready for any such dispute in future and should refrain from taking arbitrary decisions of cancelling APAs.

6. Eligibility Criteria

The CBDT has sufficient powers to cancel/revoke an APA – however, a taxpayer can only seek for a revision56 to the terms of the APA and seek for a termination.57 Once an APA has been signed, it appears that the taxpayer is bound to follow the terms and conditions of the agreement.

7. Withdrawal from the APA process

Rule 10J prescribes the process of withdrawal from the APA process. APA regimes in other countries generally allow taxpayers a flexibility to withdraw an APA application at any stage of the process. Such regimes typically enable the taxpayers to withdraw from an APA application if the negotiated position is not acceptable or the taxpayer does not see a point in agreeing to an APA because of a change in business circumstances. In case the taxpayer withdraws from an APA process, it should seek an assurance from the APA authorities that disclosures made during APA discussions should not be shared to regular revenue authorities responsible for transfer pricing audits and tax audits. In India the APA progamme lacks such confidentiality clause for the taxpayer. Also in case of withdrawl from the procedure the taxpayer will not be entitled for refund of fees.58

8. Critical Assumptions

One of the most important elements of the APA is critical assumptions. Any change or deviation from the critical assumptions can result in an amendment/revision or cancellation of the APA. An important aspect of the APA process would be for taxpayers to draw up critical assumptions that are broad enough that do not require renegotiation, especially, if a BAPA or MAPA has been executed. APAs consist of critical assumptions which depend on the TPMs. They are the objective economic and business criteria that form the basis of a taxpayer’s proposed TPM. Critical assumption is related to the assessee, an industry, a third party, or business and economic conditions and the continued existence of which is material to the taxpayer’s proposed TPM. Critical assumptions might include a particular mode of conducting a particular corporate or business structure, business operations, or many types of expected business volume. Failure to comply with the critical assumption may cause an APA to be inappropriate or unworkable. The legal effect of failure to meet a critical assumption is that the APA must be renegotiated or, failing that, cancelled. A critical assumption may not be achieved due to uncontrollable changes in economic circumstances, due to fundamental and dramatic change in the economic conditions of a specific industry. In addition, a critical assumption may become unmet due to a taxpayer’s act initiated for bona fide business reasons, like the bifurcation or transfer of a business entity or entity covered by the APA, mode of conducting operations, or a change in business strategy. Indian laws does not provide any specific list of critical assumptions which are to be included in the agreement and has been left wide open for the taxpayer and CA to decide upon it.

9. Choosing appropriate APA programme

A taxpayer should smartly choose his APA programme depending on the structure of his business and countries involved in the transaction. Choice of APA’s is significant wherein critical and complex transactions are involved.

Unilateral APA – Where there is no treaty, where a large number of countries are involved, thus making a MAPA impractical, or where small businesses are involved.

BAPA & MAPA – In an attempt to procure ‘sound tax administration’ and to eliminate any double taxation potential, taxpayers as well as the tax administrations prefer bilateral/multilateral APAs over unilateral APAs. BAPA & MAPA usually takes a longer time to conclude as more than one tax administration is involved in the process. If the taxpayer is not ready to engage into such long duration then the tax administrations may choose to provide a unilateral APA to the taxpayer. In cases where global trading is conducted on a fully integrated basis (i.e. the trading and risk management of a book of financial products takes place in a number of different locations, usually at least three), a multilateral, and not a bilateral, APA becomes necessary.

10. Annual Compliance Report

The taxpayer is required to furnish the annual compliance59 report to DGIT, for each year covered in the agreement within 30 days of due date of filing return or within 90 days of entering agreement, whichever is earlier.

2. Comparison with other countries

Various jurisdictions follow different practices for filing, processing and admission of an APA request. Some adopt a monetary threshold for accepting an APA while some focus on the degree of complexity involved in the transfer pricing issues proposed to be covered through APAs. For example, China requires that the transaction amount under the APA should be over 40 million RMB. UK on the other hand focuses on the degree of complexity involved in the transfer pricing issues proposed to be covered.

Few countries like Israel60, Italy61 and Lithuania62 the Tax authorities of these countries are given a time period to provide taxpayers with an adequate response within 120-180 days, 180 days and 60-120 days respectively. Otherwise the APA is deemed to be approved. Generally no specific time period is provided in other countries.

In countries like Australia, Canada, China, Malaysia, Netherlands, Russia, Singapore & U.S.A. have mandatory pre-filing provisions whereas France, Germany, Israel, Italy, Japan, Korea, Lithuania, Mexico & U.K. have optional pre-filing condition.

Almost all countries have a time frame of 3-5 years for an APA to conclude but there are exceptions in cases of countries such as Korea where the taxpayer can decide the number of years and in U.K. where no fee is prescribed from 18 to 21 months from date of formal submission.

JAPAN

Japan was the first country to introduce APA in 1987. Japan has a formal APA program accessible to all the taxpayers without any precondition. Japanese’s tax authorities reserve the right to reject APA applications in certain cases or if the application is deemed to be part of a tax avoidance scheme.

An APA is made in such a way that it suits the method of calculating the ALP and of the profitability for future transactions based on the financial data, whereas a TP examination in Japan deals with transactions over the past years.

In transfer pricing examinations, the calculation of an Arm’s Length Price is taken at a particular point. APA often sets a range which satisfies the arm’s length principle that does not bring about any income shifting. It should be seen that examinations63 does not get disturbed as a result of an APA request. To have confidence in the APA system, the documents received from a MNC for an APA review may not be used for the examination. This feature ensures confidentiality to the taxpayer and can be very well implemented in India.

Another important feature of the Japanese APA model is the concept of Rollback.64 When a taxpayer requests “rollback” treatment of the TPM to the years prior to the APA period, a rollback may be permitted to the TPM confirmed in the BAPA and is regarded as the most appropriate TPM for the years prior to the APA period. Both unilateral and bilateral APAs are accepted, but the National Tax Agency (NTA) prefers bilateral agreements.

The APA team received 149 APA requests till June 2010 and approximately 300 applications were in progress till June 2010. The average duration for concluding unilateral APAs is 1 year and 2 years in case of BAPA. Additionally, 154 cases of double taxation were resolved during the year under the competent authority procedure. The average duration to complete APA procedure was around 24.7 months.

The role of profit-based TPM methods such as TNMM in Japanese APAs has appeared in over 80% of the cases resolved in the year ended June 2010.

USA

United States created the APA to alleviate the cost uncertainty and time spent resolving TP disputes.65 The premise underlying the APA is that U.S. and foreign jurisdictions co-operate to tax the company’s international affairs as one global business.66

Sec. 4 of the IRS deals with the user fees which is required for each APA request. A reduced user fee will apply to additional APA requests. The maximum user fee for any filing involving more than one APA request is $50,000.

In US small business transactions are dealt separately. Section 8 of the IRS deals with special provisions Small Business Taxpayer (SBT) APAs. A SBT is any U.S. taxpayer with total gross income of $200 million or less.

Section 7 of the IRS deals with the concept of Rollback which uses regular procedures for resolving tax issues. Application of the TPM to tax years prior to those covered by the APA is an efficient measure for increasing voluntary compliance and of using available resources to address unresolved transfer pricing issues. The taxpayer may request to consider a rollback in connection with a particular APA request.

One of the important benefits of the USA APA model is its provisions regarding confidentiality. Section 12 deals with Disclosure. Any information related to the APA, and the taxpayer’s APA request for that APA, are return information and are confidential. See. 6103, 6105, 894, and 7852(d) and are not “written determinations,” and they are not open to public inspection. See 6110.

Any annual report or factual information in the background files is under exchange of information of income tax treaties or tax information exchange agreements. In cases where the exchange of information is discretionary, information may be exchanged to the extent consistent with efficient tax administration purpose and for the practices of the relevant foreign CA.

Section 15 deals with the application of Paper Reduction Act to the process of APA. The collection of information is a very tedious process which requires maintenance of records67. This information collection process includes compliances given under sections. The estimated duration of record keeping and filing is 8,200 hours. Books or records should be preserved as long they are beneficial to the internal revenue services. In normal practice the tax returns and the information related to it is considered as confidential.68

Few highlights regarding the USA APA model in the year are as follows:

In 2012 U.S. distributors and U.S. service providers, each represents approximately 30 per cent of the total. 40 per cent of transactions are involved in transfers of tangible goods and 40 per cent are involved in the provision of services. The rest of the transactions involved the use of intangible property.

In 2012 there were 126 APA applications and 140 APAs were completed.

IRS recommends companies to utilise their transfer pricing arrangements to manage the taxation of their cross-border transactions and operations more efficiently.

All the APAs have used standard critical assumptions including few critical assumptions tied to either the taxpayer’s profitability in a certain year or over the term of the APA, or to the amount of non-covered transactions as a percentage of the taxpayer’s revenue. In 2012 there were no cancellations and IRS did not cancel any APAs due to the failure of a critical assumption.

China

China has signed 53 unilateral APAs and 20 bilateral APAs during this 7 year period, accounting for 72% and 28% of the total number of APAs in China respectively.69

53% of China’s unilateral APAs were completed within one year, 45% were completed within one to two years while 2% took two to three years. While Bilateral APAs generally take more time, 55% were completed within one year, 20% took one to two years, 20% took two to three years, and the remaining 5% were completed in more than three years.70

88% of the APAs signed 2005 to 2011 still involve the manufacturing industry while only 12% relate to other industries71

The Chinese APA Programme offers a rollback options to the taxpayers and claims that the rollback stipulation has the advantage of resolving many years of potential transfer pricing issues through the APA application process. The relevant regulations for transfer pricing investigations are applicable to the rollback period, as far back as 10 years.72

The time required to complete the entire APA process depends on many factors including the type of APA (i.e. unilateral, bilateral, or multilateral), the complexity of issues involved.

The Chinese tax authorities generally aim to complete the review and negotiation process within 12 months for unilateral APAs and within 24 months for bilateral APAs. BAPA require more time to reach a consensus than unilateral APAs do.73

China considers that both tax authorities and the enterprise have the duty to keep confidential all information obtained during the whole process of the APA including pre-filing meeting, formal negotiation, examination and analysis, among others. In case of non consensus to reach agreement, the Chinese authorities are refrained from using the information against the taxpayer.

Germany

There is no specific legal basis for APA in Germany. Appropriate TP method is the basis of APA and not the desired tax result. To generate and execute APAs in Germany, the authority must resort to the Article 2574 of the OECD Model Tax Convention, which deals with mutual agreement article of the double taxation treaties, and OECD TP Guidelines, especially its annex ‘‘Guidelines for Conducting Advance Pricing Arrangements under the MAP.” It is legally binding and is completed by a ‘‘binding advance ruling’’ to the taxpayer.75 In Germany, APAs are offered in the form of a binding ruling according to Section 204 of the Tax Procedure Act (‘‘AO’’)76 or information provisions in accordance with Section 89 Para. 2 of the AO. A rejection of such an application often leads to the taxpayer being subjected to even more intense audit scrutiny in Germany.77

The main authority will reject any APA if the tax authorities of the local tax office oppose the agreement.

The average duration of the APA process can extend from one to three years. Pre-filing meeting may be requested (anonymous or named basis) before applying formally for an APA.78

Information required for APA applications

The German APA Circular is based upon OECD standards.

Critical assumption

Unlike India Germany provides a particular list of prescribed documents related to the critical assumptions79 like corporate shareholding structure, constant conditions regarding regulatory law, customs, import and export restrictions, constant conditions regarding market conditions, international payment transactions, market shares, sales prices, import and export restrictions, revenue volumes, constant conditions regarding regulatory law, customs, and international payment transactions etc.

APA documentation

The taxpayer must document and confirm that the conditions80 agreed to under the APA have been met and that there is no change of the critical assumptions81. Tax audit will be conducted within the framework after the compliance of an independent audit.

Terms of an APA and availability of rollback

An APA may range between three and five years. A rollback to past periods is allowed if the factual circumstance of the previous year corresponds with the APA period82 and is handled through the same administrative and negotiation process. Circular still provides some simplifications with respect to small and mid-sized enterprises.83 User fees for APAs was introduced in 2007. According to Article 178a Para 2 of the AO, 20,000 € is charged for every agreement, € 15,000 for renewal and €10,000 for modification of APA. These fees may be reduced for taxpayers with minor transactions to foreign affiliated companies.84

Economic downturn

Usually an economic downturn is not considered as violation of a critical assumption. APAs can be useful in an economic downturn as the future possibilities of recession on transfer pricing as well as the critical assumptions can be discussed earlier during the pre-filling with the CA.

By 2008, Germany had total of nine APAs in force, and five of which were with EU Member States.85 Four APAs were granted in 2008. Moreover, the CA received 20 to 25 APA requests in 2009. More than 100 requests are in various stages of the process.

Canada

The Canada Revenue Agency (CRA) introduced its APA programme in July 1993; taxpayers have an opportunity86 to pursue unilateral, BAPA or MAPA. The CRA has made a small business APA programme available to Canadian taxpayers under certain conditions. CRA charges taxpayers only travel costs it incurs in the completion of an APA. As of 31 March, 2010, the CRA APA programme had completed 142 APAs since inception and had 95 pending.87

Some important findings of the fiscal year 2011-12 are given below88:

• Currently over 90% APAs in process are BAPA or MAPA and less than 10% are seeking unilateral basis.

• The average time to conclude a bilateral APA was 44 months including 22 months for the CRA to undertake due diligence, TP analysis, and preparing position paper. Six months needed to negotiate BAPAs with foreign tax administrations. 12 months were needed to draft and sign the corresponding APA agreements.

• Cases involving transfers of tangible property constituted roughly 50% and intangible property and intra-group services represented 31% and 22% of cases, respectively.

• In 51% of cases transactional net margin method (TNMM) was proposed. The cost plus, profit split, comparable uncontrolled price (CUP), and resale price methodologies were proposed in 16%, 15%, 12%, and 7% of cases, respectively.

• APAs involving operations in automobile sector represents 21% of in-process APA. Computers and electronics sector represents 15% of APA cases.

The APA programme fosters a collaborative and co-operative relationship between tax-payers and other tax administrations. Not only does the programme provide an opportunity for taxpayers to openly discuss the challenges they face in attempting to comply with the tax laws of multiple jurisdictions, the prospective tax certainty provided through the programme helps to reduce barriers to trade and contributes to the free flow of capital.89

To overcome the challenges in APA, applicants are required to provide to the CRA, on good faith more detailed information pertaining to their financial statements, business operations, and industry, during the application phase of the APA process. Since it’s a time consuming process90 CRA is trying to set targets and timelines with foreign tax administrative counterparts and the identification of priority cases.

3. Merits and Demerits

Merits

Discussion in non adversarial spirit

Taxpayer and tax authorities can discuss the transfer pricing issues in a non adversarial spirit and environment. APA can facilitate free flow of information, in a less confrontational atmosphere, between the taxpayer and tax authority for the purpose of agreeing on a methodology which is legally correct and practically workable. Thus, the interaction between the taxpayer and tax authorities during the APA negotiation helps in a more objective review of the issues involved. Also APA has concluded subsequent examination of the taxpayer’s return as it will require less resources and time, because most of the relevant information about the taxpayer is already known.

Certainty

Once both the parties have consented to the TPM for duration like 5 years will avoid the “aggressive” auditor syndrome and will reduce penalty risks. It avoids potential assessments and related cash outlays. On the other hand Entry into APA process reduces involvement of a local tax authority office and forces it to accept the APA methodology. It will greatly reduce TP compliance and audit defence costs. As per the Indian APA Rules, the regular audit of the covered transactions under the APA shall not be undertaken by the TPO once an APA is concluded. It subsequently simplifies the financial reporting process.

Renewal process, reduced cost

For renewing the APA the taxpayer need to follow the same formalities and procedure except pre filing consultation which would reduce the cost up to same extent.

No limiting criteria for applicants

The law does not prescribe any monetary limit for entering into an APA which opens the APA option for small corporations.

Approval of Central Government

The procedure of taking approval from Central Government eliminates the arbitrary power of the CA.

Flexibility in determining ALP

The flexibility provided in the Act to choose a desired method of ALP is a boon for MNCs. This method will aid them to carry on their traditional methods with the approval of CA.

In the last six audits TP in India has emerged as heavily litigated and serious flaws have came out regarding the certainty of ALP. Once APA is executed, it takes away the right to make any change to agreed TP method. Any change in the TP method would subsequently go against the critical assumption and render APA cancelled.

Risk of Double Taxation is eliminated

APA results in win-win situation for both the parties involved i.e. taxpayer and tax administrator.

BAPA & MAPA, can be an effective tool in potentially eliminating double taxation. A pre-mediated and pre-determined TP method which is acceptable to all the tax jurisdictions will result into optimal allocation of income among the jurisdictions involved without the risk on an income being double taxed.

These APAs ensure that the arrangements will reduce the risk of double taxation, will be equitable to all tax administrations and taxpayers involved, and will provide greater certainty to the taxpayers concerned. These APAs offer greater tax certainty and address the full scope of a transaction and are therefore are favoured over unilateral APAs. When such agreements are possible, revenue authorities generally avoid entering into multiple unilateral agreements. However, the only downside of these APAs is that, there is high time-cost involved in concluding such type of APAs. This needs to be weighed against the benefits a taxpayer may achieve in his case. The taxpayers can also enter into a Synthetic Bilateral APAs means one in India and other outside India

FDI

The APA programme will attract foreign direct investment as it will aid in boosting the confidence of the foreign investors by bringing certainty in the transfer pricing issues.

Demerits

No time frame to conclude

The pre-filing consultation is one of the major aspects by which the applicant can gain mutual understanding with the tax authorities (APA Team). In case of BAPAs & MAPAs it is not in the complete control of the Indian CA & APA team and hence it takes time to complete the process. A major drawback is the absence of time limit to conclude an APA process. Although no time lines have been clearly given in the APA Rules, a time-line should also be proposed internally for completion of an APA to be effective for the taxpayer.

No Confidentiality Clause between the taxpayer and tax authorities

While negotiating an APA, one of the requirements would be to share a lot of information / documentation which could at times be confidential/trade secret. This involves not only the past positions of taxpayer, but also future plans and forecasts. On the other hand, if the taxpayer opts to go with the regular tax audit cycle, the information requirements are limited to the issues involved for the year under audit. In an APA situation the taxpayer is in control of information as compared to in a defence situation where information is demanded.

In an APA the taxpayer shares various confidential information like intellectual property rights, trade secrets, technology, market strategy, future plans, group policy, pricing policy, future business predictions, revenue model, etc. These informations are sufficient to determine the past and future acts of the taxpayer. In case the taxpayer finds it undesirable to share his information with the tax authorities he can resist the APA and can go back to the regular tax audit cycle. A taxpayer should smartly opt for an option of assessment depending on his future prospects and willingness to reveal information. If an APA is not concluded then whether the information would be shared with the regular audit team is a concern to be addressed.

Uncertain Pre-Filing Process

The manner in which anonymous pre-filing consultation would be carried out is not very clear. The APA scheme does not specifically articulate this process. The manner of importing pre-filing commitments into APA is not clear. One of the information requirements that need to be fulfilled in the form to be filed for applying for an APA is a ‘discussion of unassessed taxation years (Indian and foreign) and related outstanding tax, legal and other pertinent issues’. It is unclear as to the relevance of this information and the manner in which this information would be used in case the Applicant decides to not proceed with the application.

Rollback

The purpose of an APA is to have future tax certainty91 and the taxpayer may request so that the APA also covers transactions occurred in non-statute-barred taxation years i.e., a rollback. The mature jurisdictions around the world92 offer Rollback option to the taxpayers.

In Canada the CA usually allows rollback subject to few conditions:

• Non issuance contemporaneous documentation when requested for at the Tax Service Office (TSO);

• when the facts and circumstances are similar;

• when the foreign tax administration and the relevant TSO have both agreed to accept the APA rollback request; and

• Appropriate waivers given in the form.93

Transactions occurring in taxation years covered by the APA should include any rollback period, and this application will not be subject to a penalty. A request for an APA rollback can have an impact on double taxation and on transfer pricing penalties. As a result, special considerations associated with an APA rollback needs to be developed. In India rollbacks can be introduced in view of increasing TP litigation. Rollbaks can seriously avoid ligation and can cause profit to both taxpayer and CA.

Revision Procedure

Very tiring and everything will start from beginning. No time frame to conclude the revision procedure.

No Consensus

The time and cost involved in an APA process is huge. There is always a chance that the parties may come across a situation where tax authorities and tax-payers don’t reach a unanimous conclusion. This may lead to a waste of resources from both the ends.

Taxpayer not included in internal discussions

In case of a bilateral or multilateral APA, the applicant shall not be entitled to be part of the discussion between the competent authority of India and the competent authority of the other country/ countries. The logic is not explained and the taxpayer deserves an answer that why he is kept out from the negotiation process between the tax authorities.

4. Whether the provisions will achieve the desired objects

In India, to avoid TP dispute, about 146 MNCs have sought advance ruling under APA.94 The program is designed to resolve all kinds of TP disputes in a principled, cooperative manner, opposite to the previous adversarial process. The inherent idea of an APA is to increase the efficiency of tax administration by encouraging taxpayers to present before the tax authorities all the facts relevant to a proper transfer pricing analysis and to work towards a mutual agreement. APA reduces the burden of compliance by giving taxpayers greater certainty regarding their transfer pricing methods, promoting their issues and by allowing them for discussion and resolution in advance before the tax authorities.

An APA provides the taxpayer with legal certainty on what transfer pricing method will be accepted by the involved jurisdictions. However, an APA is not set to determine ex ante any level of taxable profit per se. Rather; it is a legally enforceable agreement on transfer pricing methods and critical assumptions, which normally covers selected transactions (or business activities) for specified years and affiliates of the multinational company. From the taxpayer’s point of view, an APA is worth achieving under the following circumstances:

• Associated enterprises are so densely integrated in the relevant business in such a way that a prudent businessman cannot assign functions and risk unambiguously to either entity.

• The relative value of intangibles contributes significantly to the business value.

• Comparables do not exist for the taxpayer’s type of business.

• The taxpayer seeks legal certainty for strategic business decisions.

• An APA should not disproportionately limit the taxpayer’s future flexibility on strategic business decisions.

In general, the taxpayer should consider an APA as a strategic tool to deal with transfer pricing issues. Whenever there is a business reorganisation and/or revision of the multinational’s transfer pricing system, APAs for complex issues should be put on the table. From the tax authority’s point of view, the introduction of an APA programme may reduce legal uncertainty in the field of taxation. Consequently, it will set incentives for foreign direct investments.95

5. Suggestions

Suggestions for avoiding problems with critical assumptions

1. Extreme outer limits.

The critical assumptions should be set at an extreme limits and not on insignificant limits. So as it is difficult to achieve them and that the taxpayer will not be able to manipulate the critical assumptions as drafting an APA is a very tedious process and the taxpayer will again have to go through the making of APA.

2. When possible, make critical assumptions objective.

Critical assumptions can be either subjective conditions (e.g., change of business styles) or objective (e.g., sales dropping by a certain percentage) but as far as possible these assumptions should be made objective. Example – Refer to sales dropping by a definite percentage which is objective which will avoid disputes regarding the critical assumptions

3. Try to use TPM provisions rather than critical assumptions.

Instead of including a critical assumption that certain expenses must be within a definite level, one could specify that for purposes of computing the taxpayer’s gross profit level during the APA years, advertising expenses above a certain amount will be subtracted from sales.

4. Scope of APA not to be confused with Critical Assumptions.

APA may specify a new product type which may not be covered. This provision should be part of the definition of covered transactions but the APA should not include a critical assumption that new products not be introduced.

5. Distinguish between critical assumptions and aims of APA. An APA may require a taxpayer to certain conditions. So if the taxpayer does not do so, he has violated the agreement and other party has the right to enforce or revoke the contract but this obligation cannot be termed as a critical assumption.

Public reporting

Many countries96 offering APA programme prepare and publish the annual reports of their APA scheme which comprises all the statistics related to it. This report is helpful in analysing the success rate of the APA scheme as well as act as a guide to new industries planning to enter in APA. Taxpayers are also required to submit, all reports demonstrating compliance with the rules of APA on a yearly basis in the form of APA Annual Report. The APA Annual Report substitutes the former formal transfer pricing documentation process which the taxpayer is required to comply with under regular transfer pricing legislation and thereby reduces the taxpayer’s cost and time involved in maintaining the annual mandatory transfer pricing documentation for the international transactions required under the Indian transfer pricing legislation. India in the coming years can adopt the same process and publish its annual report to aid prospective taxpayers interested in APA programmes.

Corruption issues

APA involves a lot of negotiation and procedures so care needs to be taken to ensure that APA negotiations are subject to similar oversight and balances as audits in order to mitigate risks of corruption.

Lack of experience

Negotiation during an APA process is an art which needs to be performed in a very skilled manner. The less experienced tax administrations may lack the knowledge and expertise to negotiate fair APAs, when indulged with huge multinational enterprises. In BAPA and MAPA there are chances that the less experienced country may land in disadvantaged position as compared to experienced countries. The risk can be mitigated by entering into relatively short duration of time, with an option to extend the agreement in future. Also the CA is not obliged to enter in APA and they can withdraw from negotiations if an acceptable is not reached.

Confidentiality clause

In an APA process the taxpayer shares a lot of confidential information for the purpose of efficient taxation. The board is committed to not share the information with any other person or authority. However if the parties refuse to enter into APA after pre-filing procedure then there are chance where the board may use the same information to grill the taxpayer. This presumption is not protected by any of the clauses of IT Act. There is a need to introduce a confidentiality clause which can assure the taxpayer that the information given by him to the CA should not be disclosed to any other party or be used against him.

Rollback

India can also introduce rollback in the coming years. It is discretion of the CA who has the jurisdiction in that particular year to implement or avoid any roll back requested. Taxpayer may opt for de facto rollback where uncertain TP issues of previous years are present and which can be implemented before completion of negotiations. Generally the CA around the world has the discretion to turn down roll back request for unilateral APAs and in cases where APA request would reduce taxable income. Rollback ultimately aids the taxpayer by exempting him from traditional TP methodology.

May not be beneficial for small corporations

Although there is no monetary limit defined for the taxpayer to enter into an APA but still small enterprises should refrain from entering into APA because of its huge time and cost consumption.

Conclusion

For gaining security and certainty in the business world APAs are becoming a necessity in complex situations, especially where huge transactions takes place and where functions, risk, and IPRs are shifted to other countries. APAs have shown great results in countries like USA, Japan and Canada. APA has helped many countries in reducing TP litigation. The most important aspect of an APA is the fairness and trusting relationship which is developed between taxpayers and tax authorities. Since the APA has the potential to reduce TP litigation and aid international transactions, the Indian economy is definitely going to get a benefit out of it. The Indian APA system has been well designed but the test run has not yet taken place. Apart from few features like confidentiality clause and roll backs the programme tends to bring positive changes in the Indian trading market.

1 Pamela L. Kayfetz & Leo B. Helzel, Transfer Pricing: Achieving Fair National Taxation of International Transactions, 3 ANN. INTERNATIONAL & COMP. L. 193 (1996).
2 Model Tax Convention on Income and Capital, OECD September 1995. The work and development of this have involved a number of countries, which refer to this model in the settlement of disagreements.
3 For a discussion of the current situation as perceived by large multinational corporations, see Ernst & Young, Transfer Pricing: Risk Reduction and Advance Pricing Agreements, E & Y 1995 reprinted in 11 TAX NOTES INT’L 293 (1995).
4 Charles F. Connolly, The New Transfer Pricing and Penalty Regulations: Increased Compliance, Increased Burdens, and the Search for a Safe Harbor, 16 U. PA. J. INT’L BUS. L. 339, 340 (1995).
5 E & Y, TP: Risk Reduction and APA, 10 TAX NOTES INT’L 299 (1995)
6 This is especially the case when the competing jurisdictions do not harmonize their tax rules. Wickham & Kerester, supra note 5, at 401.
7 Supra note 1 at 194 (1996).
8 The provisions of TP were introduced by substituting sections 92 to 92F for the existing section 92 by Finance Act, 2001, w.e.f. April 2002.
9 Section 92F(ii) defines ALP as ‘a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions.
10 Retrieved from https://businesstoday.intoday.in/story/new-arrangement-vows-to-reduce-transfer-pricing disputes/1/192684.html, Edition 17-03-2013
11 The attitude of DRP is pro-revenue hence it defeated the purpose and thereby failed.
12 Government proposed to introduce safe harbors, but these are yet awaited.
13 Alternate mechanism incorporated into many tax treaties for resolution of International Tax disputes Long time to conclude MAPs.
14 APA was first proposed in the Direct Tax Code (DTC), 2010 but the implementation of DTC itself failed
15 Vide Notification No. 36/2012, dated 30-8-2012.
16 Rule 10F(a) Income-tax Rules, 1962
17 Taxpayers Information Series-43, Advance Pricing Agreement Guidance with FAQ, Income Tax Department India, p 1
18 The term “International transaction” includes transactions between the related parties (called “associated enterprises” under the Income-tax Act, 1961).
19 Rule 10G of Income Tax Rules, 1962 defines the persons who are eligible to enter into an APA.
20 Central Board of Direct Taxes is the taxing authority in India.
21 Rule 10F(k) of Income-tax Rules, 1962.
22 Rule 10F(c) of Income-tax Rules, 1962.
23 Application for a pre-filing meeting is to be submitted in Form No 3CEC to the Director General of Income-tax (International Taxation).
24 Rule 10H, Income Tax Rules, 1962 makes it mandatory for a taxpayer to go for a pre-filing process before entering into an APA.
25 Application for APA is to filed in Form No 3CED.
26 Transfer Pricing Law & Practice in India, Deloitte, Woller Kluwer Business, 3rd Ed., 2011
27 Finance Act 2001 w.e.f. 1-4-2002.
28 Article 9 of the OECD Model Tax Convention.
29 Section 92CC (2) of the Income-tax Act, 1961.
30 Section 92CC 5(a) of Income-tax Act, 1961.
31 Section 92CC 5(b) of Income-tax Act, 1961.
32 Section 92CC 7 of Income-tax Act, 1961
33 Section 92CC 8(a) of Income-tax Act, 1961
34 Rule 10M(3) of Income-tax Rules, 1962. Binding effect will cease only after due notice by the parties
35 Rule 10M(2) of Income-tax Rules, 1962.
36 140 T.C. No. 18 (June 26, 2013), the case is still pending before the U.S. Court
37 Section 482 of the Internal Revenue Code (IRC) authorizes the IRS to allocate, distribute and apportion income, deductions, credits and allowances among members of organizations, trades or businesses owned or controlled, directly or indirectly, by the same interests to prevent the evasion of taxes and to accurately reflect income.
38 Both of the APAs were unilateral agreements between the IRS and Eaton. The APAs in Eaton are governed by predecessors to Rev. Proc. 2006-9: (1) Rev. Proc. 96-53, 1996-2 C.B. 2, with respect to the Original APA; and (2) Rev. Proc. 2004-40, 2004-2 C.B. 50, with respect to the Renewal APA. In all respects relevant to the Eaton case, the revenue procedures governing the APAs are virtually identical
39 The penalties are computational “additions to tax” per section 6662(h) of the IRC for gross valuation misstatements of income.
40 IRS Announcement 2011-22, “Announcement and Report Concerning APA”
41 Defined in [IRC] §7121
42 Rev. Proc. 2006-9, 2006-1 C.B. 278, as modified by Rev. Proc. 2008-31, 2008-1 C.B. 1133 at sec. 11.06(1)
43 IRS Announcement 2011-12
44 In Anderson v. United States, 344 F.3d 1343, 1353 (Fed. Cir. 2003) the court held, “to form an agreement binding upon the government, four basic requirements must be met: (1) mutuality of intent to contract; (2) lack of ambiguity in offer and acceptance; (3) consideration; and (4) a government representative having actual authority to bind the United States in contract”.
45 Rev. Proc. 2004-40, 2004-2 C.B. 50, at sec. 5.08; Rev. Proc. 96-53, 1996-2 C.B. 375, at sec. 6.05(6); IRS Ch. Couns. Notice CC-2001-016 (delegating signature authority to the APA Director).
46 United States v. Winstar Corp., 518 U.S. 839, 895 (1996). “When the Government enters a contract with a private party, ‘its rights and duties therein are governed generally by the law applicable to contracts between private individuals”. Memorandum of Law in Support of Petitioner’s Motion for Partial Summary Judgment, Eaton at 2.
47 A condition subsequent is “an event which occurs subsequent to a duty of immediate performance of a contract after it has once accrued or become absolute”. Park Props. Assocs. LP v. United States, 82 Fed. Cl. 162, 169-70 (2008).
48 Javierre v. Cent. Altagracia, 217 U.S. 502, 507 (1910); New Britain Mach. Co. v. Yeo, 358 F.2d 397, 406 (6th Cir. 1966).
49 In the Tax Court, there is a presumption that the IRS’s tax deficiency determinations are correct, and the taxpayer bears the burden of proving that those determinations are incorrect. See Rule 142(a), Tax Court Rules of Practice & Procedure; see also Welch v. Helvering, 290 U.S. 111 (1933).
50 Ordinarily, the Tax Court does not have the power to examine the IRS’s activities before it issued the notice of deficiency. See Greenberg’ s Express, Inc. v. Commissioner, 62 T.C. 324, 328 (1974); Suarez v. Commissioner, 58 T.C. 792, 813-14 (1972).
51 The IRS has historically issued numerous different types of guidance under the auspicious of section 7805(b) of the IRC, including written determinations such as a “private letter ruling”. See Rev. Proc. 2013-1, 2013-1 I.R.B. 1
52 Dixon v. United States, 381 U.S. 68 (1965); Auto Club of Mich. v. Commissioner, 353 U.S. 180, 184 (1957); Pac. First Fed. Sav. Bank v. Commissioner, 101 T.C. 117, 121 (1993).
53 Petitioner’s Memorandum in Opposition to Respondent’s Cross-Motion for Partial Summary Judgment, Eaton at 5
54 Sec. 6.08 (“Signature on an APA by the APA Director and the taxpayer will constitute agreement to the APA”).
55 Petitioner’s Memorandum in Opposition to Respondent’s Cross-Motion for Partial Summary Judgment, Eaton, at 9.
56 Rule 10Q Income-tax Rules, 1962.
57 Rule 10R Income-tax Rules, 1962.
58 Rule 10J(3) of Income-tax Rules, 1962.
59 Rule 10O(2) of the Income-tax Rules, 1962 prescribes the Form 3CEF for filing compliance report.
60 Section 85A(d) of the Israel Tax Ordinance.
61 Article 8 of Law Decree No. 269 of September 30, 2003 – implemented with the Regulation of the Director of the Revenue Agency of July 23, 2004 – introduced the International Ruling Procedure.
62 The Head of the State Tax Inspectorate decree VA-106 of 21 October 2011.
63 Transfer Pricing Administrative Guidelines on Consolidated Corporate Groups 2-22.
64 Transfer Pricing Administrative Guidelines on Consolidated Corporate Groups 2-23.
65 Seymour Zwick & Theresa Dilvorth, Alternative Dispute Resolution or Examination by IRS, Transfer Pricing (BNA) at 455 (Dec. 13, 1995).
66 John Turro, IRS Inks Two Pricing Agreements in Derivative Products Area, 55 TAX NOTES 725 (1992).
67 Sections 3.06, 4, 7.03, 10.01, 10.02(1), 10.04, 10.05 and 11.01 of the IRS.
68 Section 6103 of the Internal Revenue Code.
69 China Advance Pricing Arrangement Annual Report 2011, State Administration of Taxation People’s Republic of China p.18
70 Ibid p. 24
71 Ibid p. 26
72 Ibid p. 15
73 Ibid p. 25
74 Article 25 provides the German competent authority with the ability to conclude an ‘‘advance agreement procedure’’ with the other competent authorities upon the application of the taxpayer.
75 Engler, G and Elbert, D, Chapter F: Procedures, in Voegele, A./ Borstell, T./Engler, G.: Handbuch der Verrechnungspreise, 3rd version, Beck Munich, 2010
76 Abgabenordnung
77 Schnorberger, Stephan ‘‘Germany’s New APA Circular: Practical Guidance, Clarification’’, BNA Tax Management Transfer Pricing Report, Volume 15 Number 14, November 22, 2006
78 Para 2.2 of the APA circular
79 Para 3.7 of the German APA
80 Verordnung zu Art, Inhalt und Umfang von Aufzeichnungen im Sinne des § 90 Abs. 3 der Abgabenordnung (Gewinnabgrenzungsaufzeichnungsverordnung – GaufzV) of 13 November 2003
81 Para 6.1 of the APA circular
82 Para 7.3 of the APA circular
83 Para 8 of the APA circular
84 Retrieved from https://www.ey.com/GL/en/Services/Tax/International-Tax/Guide-to-advance-pricing agreements– APA—-Germany
85 EU Joint Transfer Pricing Forum Draft 2009 APA table, (https://ec.europa.eu/taxation_customs/taxation/company_tax/transfer_ pricing/forum/index_en.htm)
86 Information Circular 94-4R, Canada Revenue Agency
87 https://www.ey.com/GL/en/Services/Tax/International-Tax/Guide-to-advance-pricing-agreements–APA—-Canada, Retrieved on 16:36, 06/09/2013
88 Advance Pricing Arrangement, Programme Report, 2011-12, Canada Revenue Agency pp 2,3
89 Ibid p. 17
90 Ibid p. 16
91 IC 94-4, International Transfer Pricing: Advance Pricing Arrangements, See, for comprehensive guidance on APAs
92 Germany, US, Japan, China, Canada offers a option of rollback in their APA programme.
93 Outlined in sub-paragraph 152(4)(a)(ii) of the Income-tax Act (Canada)
94 Retrieved from https://articles.economictimes.indiatimes.com/2013-05-26/news/39538214_1_pricing-apa-international-transaction May 26, 2013
95 Vo¨ gele/Vo¨ gele: Advance Pricing Agreements bzw. Verbindliche Ausku¨ nfte im Rahmen der neuen deutschen Verwaltungsgrundsa˜ tze, NWB Steuer und Studium, 2002
96 This paper has made references from the data available in APA Reports published by the various taxing authority around the world like China, USA, Germany, Canada, etc.

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