—Guide
Advance Pricing Agreements in India: Unilateral, Bilateral and Rollback Explained
How India's Advance Pricing Agreement programme works: the types of APA, the process, rollback to earlier years, and when an APA is worth pursuing.
Transfer pricing disputes can repeat year after year. An Advance Pricing Agreement (APA) breaks that cycle by agreeing, in advance, how intercompany transactions will be priced. India's APA programme has become one of the most active in the world. This guide explains it.
What an APA Is
An agreement between a taxpayer and the tax department setting the transfer pricing method, and often the expected results, for specified international transactions, for up to five future years.
Types of APA
- Unilateral: between the taxpayer and the Indian tax department only. Gives certainty in India but not in the counterparty's country.
- Bilateral: also involves the tax authority of the counterparty's country, under the treaty. Gives certainty in both countries and avoids double taxation.
- Multilateral: involves more than two countries.
Rollback
An APA can be applied to up to four years before the APA period — known as rollback — where conditions are met, including that the transactions and facts are the same. Rollback can settle years already under assessment or appeal.
The Process
- Pre-filing consultation, which is optional, to discuss scope and feasibility.
- Formal application, with the proposed method and analysis, and the fee.
- Examination by the APA authorities, including meetings and site visits.
- For bilateral APAs, negotiation between the competent authorities of the two countries.
- Signing of the agreement.
- Annual compliance reports during the APA period.
When an APA Makes Sense
- Recurring transfer pricing adjustments on the same transactions.
- Significant or complex transactions where certainty matters.
- Groups wanting to avoid double taxation through a bilateral APA.
- Where rollback can settle costly past disputes.
When It May Not
For routine, low-value transactions, safe harbour rules may offer certainty more simply.
Getting Help
Think Filing advises on whether an APA suits your group and supports the application and negotiation.