Which of the following is the correct regarding lsquo Advance Pricing Agreements rsquo or APAs ........

Economic Affairs Financial Markets

Which of the following is the correct regarding ‘Advance Pricing Agreements’ (or APAs)?

APAs deal with pricing of defence products India is set to buy from foreign vendors in future.

APAs are tools to curb illicit investments from Tax havens

APAs allow the taxpayer and the tax authority to avoid future transfer pricing disputes by entering into a prospective agreement regarding the taxpayer's transfer prices.

APAs deal with settlement of foreign currency liabilities in case of Balance of Payments.

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Explanation:

The international transactions are complex and involve more than one country. The sole objective of the APA is to bring tax certainty in international transactions and overcome the issues due to transfer pricing between related parties. By related parties, we mean to say that one party is a holding, subsidiary or an associate company of another party.