Advance Pricing Agreement

Q.  Which of the following is/are true?

1) An Advance Pricing Agreement is between a buyer and directly the farmer.
2) These agreements currently form the basis of contract farming in India.
- Published on 18 Mar 16

a. Only 1
b. Only 2
c. Both 1 and 2
d. Neither 1 nor 2

ANSWER: Neither 1 nor 2
 
  • An Advance Pricing Agreement, or APA, is essentially a negotiated deal between a taxpayer and the tax authorities that sets out the method for determining the transfer pricing pertaining to transactions between a subsidiary and its foreign parent.
  • The agreement relates to pricing of assets, tangible and intangible, services and funds that are transferred within an organisation in a cross-border transaction.
  • India had introduced the APA regime in 2013-14, which is gaining traction.

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