A preferential price agreement or preferential pricing agreement (APA) is an agreement between at least two states parties to a tax agreement. Pre-price agreements are negotiated by the competent authorities of each of the countries concerned. To avoid such manipulation, the Indian tax department imposes the price of different components between Maruti and SMC. At the beginning of a year, the price calculated for intra-company transactions is set in advance and maintained for the next five years. This price agreement between Maruti and India`s tax service is called the Early Price Agreement. The APA negotiations require significant contributions from taxpayers and the relevant authorities. Therefore, the APA procedure is particularly appropriate in cases where the parties must agree on essential transfer pricing that can be interpreted. Before applying for an APA, the subject should have preliminary discussions with the appropriate authority to determine whether the APA procedure is appropriate to the issue of the transfer pricing of the subject. The objective of the preliminary discussions is to choose the most appropriate method in each case. The pre-price agreement is always the initiative of the taxpayer.
The APP procedure begins with the written request of the subject to the competent authority. There is no standard format for application in Finland, but the subject should check with the competent authorities of other countries to verify the requirements set in those countries for the application for APA (for example. B deadlines for submitting the application, content requirements). The APA procedure is generally conducted in English, which is why the application for the APA must be written in English. The bill aims to optimize the procedure for concluding advanced price agreements (`APA`) in order to define the conditions under which transactions can be considered controlled and to introduce other specific amendments to the provisions of the Russian tax code. The jurisdiction of the BZSt for the procedures of mutual agreement, arbitration and preliminary APAs of the Finnish tax administration or the central tax office does not eliminate the risk of international double taxation. The question of how a transaction made by related parties is handled in the context of the imposition of the other party remains unresolved in these decisions. On the other hand, the process of negotiating an APA between two or more states can be lengthy and will not necessarily lead to an agreement. A pre-price agreement is an agreement between states parties to a tax treaty.
It applies to situations in which transfer pricing issues related to intragroup transactions within a group of international activities must be resolved. Companies that wish to avoid the threat of double economic taxation in advance can apply for an APA.