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Simple English definitions for legal terms

advance pricing agreement

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A quick definition of advance pricing agreement:

An advance pricing agreement is a deal made between a big company that operates in different countries and the tax authorities of those countries. The agreement decides how the company will calculate the prices of goods or services that it transfers between its different branches in different countries. The purpose of the agreement is to avoid double taxation, which means paying taxes twice on the same income. There are different types of advance pricing agreements, depending on how many tax authorities are involved. However, if a tax authority is not part of the agreement, it can still decide to tax the company differently.

A more thorough explanation:

An advance pricing agreement (APA) is a binding arrangement made between a multinational company and one or more national tax authorities. The purpose of this agreement is to determine the method that the company will use to calculate transfer prices, with the aim of reducing or eliminating double taxation.

There are three types of APAs:

  • Unilateral APA: An agreement made between a company and one tax authority.
  • Bilateral APA: An agreement made between a company and two tax authorities.
  • Multilateral APA: An agreement made between a company and more than two tax authorities.

It's important to note that a tax authority that is not a party to the agreement is not bound by the transfer-pricing method specified in the agreement.

Let's say a multinational company has subsidiaries in two countries, Country A and Country B. The company wants to ensure that it doesn't pay taxes on the same income twice, so it enters into a bilateral APA with the tax authorities in both countries. The APA specifies the transfer-pricing method that the company will use to calculate the prices at which it transfers goods or services between its subsidiaries in Country A and Country B.

Another example could be a company that operates in multiple countries and wants to avoid disputes with tax authorities over transfer pricing. The company could enter into a multilateral APA with the tax authorities in all the countries where it operates. The APA would specify the transfer-pricing method that the company will use to calculate the prices at which it transfers goods or services between its subsidiaries in different countries.

These examples illustrate how APAs can help multinational companies avoid double taxation and reduce the risk of disputes with tax authorities over transfer pricing.

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MIAMI A
[] AromaticTroubledDormouse
20:55
How does one know if they are UR1 or UR2?
[] AromaticTroubledDormouse
20:56
CONGRATS MACAQUE!
TY
got a random stanford email and almost had a heart attack
ALSO CONGRATS!
Congrats1!
21:15
Miami A, yall I'm so excited I could cry.
21:15
Feel like I can finally stop holding my breath!! Whew!!!
[] baddestbunny
22:16
every time I get accosted by a strange man who follows me around because my male coworkers were too busy talking to walk me back to my car I get closer to saying we need to bring back traditional gender roles
Dkk
22:32
Nice! @Macaque
Dkk
22:32
@Aromatic, Have to guess.
Dkk
22:33
That sucks @Bunny do you have to go to the hospital?
[] baddestbunny
22:40
I said accosted not assaulted
23:35
guys. my notre dame address just went long is this good or bad
1a2b3c4d26z
23:37
Oooooo me too
23:37
omg is this good or bad
Dkk
23:47
Idk if gender roles are gunna fix that then.
23:49
it looks like most people who applied in october last cycle didn't get a decision until january... does it even mean anything that our addresses went long??
hows ED 2 compared to ED 1?
Dkk
0:10
No idea
windyMagician
0:34
reporting live to say my ndls address also went long
does it mean anything ^
Dkk
2:21
NDLS and Fordham took a very long time last year. It's good info for people to know.
[] baddestbunny
4:29
let’s get after it boys and girls
Dkk
5:21
I gtg to bed soon.
Dkk
5:22
Big day today. Gunna be a crazy one. I will sleep through the first half.
good morning lsd it is 5 am EST
also jazzy my ndls address went long ages ago i sadly do not think it means anything
my stanford address also went long LOL i think at most it's an indicator it's under review
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