Transfer Pricing

Introduction

An Advance Pricing Agreement (“APA”) is a formal agreement, usually for multiple years, between a taxpayer and a tax authority, on the future application of transfer pricing policies in relation to the related party transactions. The UAE's Corporate Tax Law, under Article 59, has incorporated the notion of APA.

Objective

• To provide Certainty with respect to tax outcome of the taxpayer’s international transactions
• To reduce the burden of compliance and risk of potential disputes.
• To reduce the potential for double taxation due to TP adjustments on cross-border dealings.

Types of APA

• Unilateral APA (“UAPA”)- Agreement between taxpayer and the tax authority of the taxpayer’s jurisdiction.
• Bilateral APA (“BAPA”)- Agreement involving the taxpayer, the foreign associate enterprise (“AE”), the domestic tax authority, and the foreign tax authority of the AE.
• Multilateral APA (“MAPA”)- Agreement involving the taxpayer, two or more foreign AEs, the domestic tax authority, and the foreign tax authorities of the AEs. 

Timeframe - Up to 5 years

How are APAs different from Mutual Agreement Procedures (“MAP”)?

MAP - A MAP aims to prevent economic double taxation by aligning taxation with treaty provisions.

APA - An APA allows taxpayers to agree on a transfer pricing methodology with the tax authorities in advance for future years.

How can Crowe help?

• Perform a qualitative analysis of the facts and circumstances to support unilateral, bilateral and multilateral APA submissions.
• Assisting in preparing and filing the necessary reports with the tax authorities to demonstrate compliance with the APA.
• Providing ongoing support to the taxpayer in the event of disputes or changes in business operations that could impact the APA.