Question
What is the primary objective of an Advance Pricing
Agreement (APA)?ÂSolution
Advance Pricing Agreements (APAs) are primarily designed to establish the pricing methodology for international transactions between related parties (e.g., subsidiaries of a multinational corporation) before these transactions occur. The core principle behind APAs is to ensure that these transactions are conducted at an arm’s length price. This means the price should be the same as if the transactions were between independent entities.
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