Advance pricing agreement
A mechanism whereby the setting of transfer prices in respect of specified transactions may be agreed with tax administrations in advance of the transactions being undertaken and reported. This is designed to offer certainty for a taxpayer that the transfer pricing ( www.practicallaw.com/A37107) covered by the arrangement will not be challenged during the period of the arrangement by the tax administration provided the terms of the arrangement are observed. For further detail, see Practice note, Advance pricing agreements: tax ( www.practicallaw.com/2-367-4008) . In the EU, APAs may, however, be challenged under state aid rules (see Legal update, Commission announces decisions on investigations into transfer pricing arrangements on corporate taxation of Starbucks and Fiat Finance ( www.practicallaw.com/4-619-6089) .