Advanced Pricing Arrangements
An Advance Pricing Agreement (APA) is a formal arrangement that determines, in advance of controlled transactions, an appropriate set of criteria (such as the transfer pricing method, selection of comparables, relevant adjustments, and critical assumptions about future events) for establishing the arm’s length pricing of those transactions over a specified period.
The APA process is initiated by the taxpayer and involves negotiations between the taxpayer, one or more associated enterprises, and one or more tax authorities. Through the APAs, taxpayers can achieve tax certainty for the transactions with respect to the pricing/method/adjustments eventually resulting in reduced burden of litigation.
Our End-to-End Support for Advance Pricing Agreements
Starting the 4th Quarter of 2025, Taxpayers may make an application to FTA in relation to unilateral advance pricing agreement with respect to an existing or proposed transaction or arrangement.
1. Feasibility Analysis for an APA
- Evaluate whether an APA is feasible for the current and proposed intercompany transactions
- Identify potential benefits, risks, and challenges.
- Conducting a cost benefit analysis for an APA vis-à-vis the traditional litigation route
- Assess the jurisdictions involved and evaluating the nature of APA to be filed (i.e. unilateral or bilateral)
2. Pre-filing Consultation
- Assistance in preparation for and participating in pre-filing meetings with the tax authorities.
- Present the overview of current/proposed transactions and discuss the transfer pricing approach.
- Obtain feedback from the tax authorities and address any concerns
3. Formulation of APA Strategy
- Develop the going-in strategy for the APA, including selection of methods, years to be covered and key assumptions
- Alignment of the APA strategy with business objectives of the Group and information in Local File/Master File
- Coordination with the relevant group entities and the respective tax advisors
4. Preparation and filing of APA Application
- Assistance in preparation of detailed APA request documentation, including:
- Functional and risk analysis
- Economic analysis
- Selection of transfer pricing method
- Selection of comparables and financial analysis
- Critical assumptions and proposed terms
- Submission of application to tax authorities.
5. Negotiating the APA with tax authorities
- Representing the Taxpayer in the discussions and negotiations with tax authorities
- Responding to the queries from tax authorities and providing any additional information that may be requested
6. Finalization and Implementation
- Review and support the execution of the final APA agreement.
- Advise on implementation of agreed terms of APA in the taxpayer’s entity and the relevant group entities involved in the transaction
7. Compliance with APA terms
- Monitor adherence to APA terms and advise on any required adjustments.
- Track any deviations from critical assumptions.
8. Renewals
- Evaluate the feasibility of renewal of APA before the expiry period
Why Choose Young Global?
Our team at Young Global brings extensive experience in handling Advance Pricing Agreements (APAs) with multiple tax authorities, including those in Saudi Arabia (KSA), Egypt, Qatar, the Netherlands, the UK, India, and Denmark. This broad exposure to diverse regulatory environments equips us with deep insight into transfer pricing practices and negotiation dynamics. As a result, we are well-positioned to develop robust pricing strategies and effectively represent our clients in negotiations with tax authorities.
FAQs to Guide Your Business Decisions
Concise insights on our core services
An APA is a formal arrangement between a taxpayer and the UAE Federal Tax Authority (FTA) that determines the appropriate transfer pricing methodology for specific cross-border related party transactions in advance, over for a fixed period of time.
APAs typically cover cross-border transactions between related parties which are subject to transfer pricing provisions. The following types of transactions may be included in an APA --> Sale or purchase of goods --> Provision of services --> Licensing or use of intangible property --> Financing arrangements --> Cost-sharing arrangements
--> Unilateral APA: A unilateral APA is an agreement between a taxpayer and one tax administration . It provides advance certainty on the transfer pricing method for specific cross-border related party transactions. However, a Unilateral APA is not binding on foreign tax administrations, which means the other tax administration may not accept the agreed pricing, leading to the potential risk of double taxation. --> Bilateral APA: An agreement between the taxpayer, the competent authority in the taxpayer’s jurisdiction, and the competent authority of a foreign tax administration. A bilateral APA is negotiated under the provisions of an applicable Double Taxation Agreement and is, therefore, binding on both the tax administrations ensuring consistent treatment in both countries. --> Multilateral APA: An arrangement involving the taxpayer, the FTA, and two or more foreign tax authorities.
At present, the legislation allows the FTA to introduce and implement an APA program (Federal Tax Authority Decision No. 2 of 2025). While a general framework exists, a formal APA program with processes and details are yet to be specified by the FTA.
Generally, large multinational enterprises (MNEs) with significant related-party cross-border transactions apply for APAs. However, eligibility criteria will be fully defined once the FTA issues further clarifications and directions in this regard.
Yes, the UAE Corporate Tax Law allows for bilateral and multilateral APAs. However, as per Decision No. 2 of 2025 issued by FTA, only unilateral APA applications will be accepted starting Q4 2025 and the date of receipt of any other APA applications shall be announced post that.
