Q:
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What is advance pricing arrangement?
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A:
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It is an arrangement that determines an appropriate set of criteria for the determination of the transfer pricing for controlled transactions over a fixed period of time. It provides multinational enterprises with a tool to manage and mitigate the transfer pricing risk on a prospective basis.
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Q:
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What are the basic features of an advance pricing arrangement?
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A:
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The said arrangement establishes the transfer pricing methodology, covers a period of 3 to 5 years and requires taxpayers to make annual reporting.
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Q:
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What are the benefits of an advance pricing arrangement?
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A:
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It allows taxpayers to:
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1.
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Have more certainty on their tax liability;
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2.
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Ensure that the arm’s length principle is fairly applied;
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3.
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Reduce the risk of double taxation; and
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4.
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Avoid the risk of audit and penalty.
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Q:
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Who can apply for an advance pricing arrangement?
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A:
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If you have controlled transactions and need assurance that such transactions comply with the arm’s length principle, you may then apply for advance pricing arrangement for those transactions.
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Q:
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How to apply for advance pricing arrangement?
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A:
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You should first submit a request for advance pricing arrangement early engagement. The request together with a draft case plan should be submitted at least 6 months prior to the proposed commencement date for the advance pricing arrangement requested to the Inland Revenue Department.
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FAQ
