Warning

Info

Warning

Info

Warning

Info

LSDefine

Simple English definitions for legal terms

advance pricing agreement

Read a random definition: right of election

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.

advance premium | advancing market

Warning

Info

General

General chat about the legal profession.
main_chatroom
👍 Chat vibe: 0 👎
Help us make LSD better!
Tell us what's important to you
Dkk
13:29
I'm at your mommas house rn: https://x.com/Mansavelli_/status/1648073454665572352
triplethread
13:29
im addicted to reacting to all of the decisions
triplethread
13:29
with the emojis
HopefullyInLawSchool
13:29
I shop at Joe
HopefullyInLawSchool
13:29
Joe's
glovediedthisishismom
13:30
i shop at tawget
glovediedthisishismom
13:30
im dawk gawthic maga
triplethread
13:30
i shop at giant eagle
ForDizzyDJoy
13:31
How did i miss Fordham and American’s wave and I applied in september 🙃
13:33
Lol UC Davis took me of ED and put me in RD
13:34
surprised I didnt get straight denied
HopefullyInLawSchool
13:34
they emailed you/
HopefullyInLawSchool
13:34
?
13:35
@HopefullyInLawSchool: Yea, I just got it
i just want a cornell ii :(
13:37
yak you will be fucking shit up at cornell this time next year dw
i love u
13:38
love you too bby
glovediedthisishismom
13:42
what if desantis appoints lara trump and matt gaetz to be floridas senators
Dkk
13:42
Sounds good to me
HopefullyInLawSchool
13:43
@glovediedthisishismom: What if he appoint Ym instead?
HELP
every damn opportunity
13:47
do schools straight reject people from ed or to they always ed-rd if its a no for ED?
HopefullyInLawSchool
13:48
Some schools rject
13:49
Thanks! I couldn't find any reddit thread about it lol
13:49
but just means now I have to wait for the rejection from Davis
glovediedthisishismom
13:53
i just wanna rock
glovediedthisishismom
13:53
bodyadaya
13:53
let it rock
LSD+ is ad-free, with DMs, discounts, case briefs & more.