Advance Pricing Agreement (APA)

An advance pricing agreement (APA) is an ahead-of-time agreement between a taxpayer and a tax authority on an appropriate transfer pricing methodology (TPM) for a set of transactions at issue over a fixed period of time(called "Covered Transactions").

In India:

The APA Scheme was introduced in the Income Tax (IT) Act, 1961 in 2012 and the provisions related to rollback were introduced in 2014.

It strengthens Government’s mission of fostering a non-adversarial tax regime.  

It endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. 

Under BAPA, certainty in tax treatment is provided for the next 5 years while rollback provides dispute redressal for a maximum of four past years preceding APA years.