Do I need an advance pricing arrangement?

With a pre-filing meeting rather than an application. You set out the transactions, the method you propose and the years you want covered, and the authority indicates whether this is a case it will take. That conversation is where most arrangements are shaped or abandoned, and it is cheap by comparison with a full submission. Pre-filing is followed by the submission itself, then analysis and negotiation, either unilaterally with one authority or bilaterally with the treaty partner. Treat pre-filing as the decision point, not as a formality on the way to a decision already made.

They solve different problems. A unilateral arrangement fixes how one country will treat the transaction. That gives certainty on that side and none on the other. If the risk you are managing is double taxation — two authorities taxing the same profit because each thinks the price should have been different — only a bilateral arrangement reaches it, because there the two authorities agree with each other rather than with you separately. A unilateral arrangement is the reasonable choice where the other side of the transaction sits somewhere with little real transfer pricing exposure.

More than you would hand over in an audit, and before any dispute exists. The submission explains how the group prices the transaction, why that method was chosen, what the alternatives were and how the business looks underneath it. That is the genuine cost of the arrangement and it is worth saying out loud before you start: you are trading a full view of your pricing for certainty about it. Where a group is not confident its conduct has matched its stated policy, that review belongs before the submission, not in the middle of a negotiation.

Long enough that it is a project rather than a task, and long enough that some of the years you wanted covered can slip past while it is being negotiated. Nobody involved can give you a date, because the pace is set by the authority's own analysis and, in a bilateral case, by two authorities corresponding with each other. The practical consequences are three. Decide early which years you are asking for. Keep filing on the method you have proposed while the negotiation runs. Keep the underlying documentation current, so the case does not have to be rebuilt part way through.

Ask at pre-filing rather than assuming, because how far an arrangement reaches backwards depends on the programme and on the facts. India's programme, for instance, has a rollback facility covering specified earlier years on the same transactions. Where earlier years cannot be brought inside the arrangement they stay live and need their own treatment — documentation, a competent authority request under the treaty, or a settlement. The point to carry away is that an arrangement is mainly forward-looking, so the open years behind it require a separate plan made at the same time.

The work does not stop at signature. An arrangement is conditional on the facts you described remaining true, so expect reporting that confirms the transactions ran the way the submission said they would, and critical assumptions that have to be watched. A reorganisation, a new product line or a shift in which entity performs the functions can put the transaction outside what was agreed. Groups lose arrangements this way, quietly, by carrying on as normal. Put the compliance step into the finance calendar on the day the arrangement is signed, not the year it is first due.

No — and if you came here to calculate FTP, this is not it. Fund transfer pricing is a bank's internal allocation of funding costs and benefits between its own business units, a treasury and asset-liability management discipline used to measure branch or product profitability. Tax transfer pricing is about prices between legally separate related parties across borders, and about which country taxes the resulting profit. The words overlap; the fields do not. See our transfer pricing work.

Moving your own capital between your own accounts is not itself income, so the transfer is not what creates tax. What can create tax or reporting is the income the money earned before it moved, a foreign-exchange gain on certain holdings, and the reporting obligations the balances themselves trigger — foreign account and asset reports keyed to balances rather than income. Remittances out of some countries also need certification before the bank will send them. See foreign account reporting.