Advanced Pricing Agreements (APA)

Are you planning to enter into a high-value intra-group transaction? Did you know that you can secure this transaction in terms of transfer pricing? You can apply to the Head of KAS for an APA, which is a decision confirming that the conditions set in this transaction are arm’s length. Importantly, you can negotiate the market level of remuneration with the Head of KAS and, in the case of international transactions, simultaneously with authorities from other countries. This is crucial because transfer pricing regulations are not harmonized between countries, and possible audits could lead to double taxation.

Advance Pricing Agreements (APAs) are made between the taxpayer and the tax authority. The authority accepts the taxpayer’s choice and method of applying the transfer pricing method used in transactions with related parties. In practice, this provides the strongest protection for intra-group transactions.

For businesses, APAs can be an effective tool to reduce the risk of improper pricing with related parties and challenges from tax authorities regarding how prices are set.