What is an advance pricing agreement rollback?
An advance pricing agreement settles the transfer pricing method for future years. A rollback applies that same agreed method to earlier years involving the same transactions, so the years already filed are dealt with on the basis the authority has just accepted rather than left open to separate examination. It is available in some countries, including India, and not everywhere. The attraction is obvious: one negotiation covering both directions in time. The limit is that it operates on the transactions the agreement covers, so it reaches backwards only as far as the facts stay the same.
Can an advance pricing agreement apply to years already filed?
Where a rollback is available, yes, and that is precisely what it is for. The method agreed prospectively is applied to the earlier years, which usually means amending or adjusting the positions originally taken to match it. The consequence is worth thinking about before asking: applying the agreed method backwards may produce more taxable profit in those years, not less, depending on how the original filings were prepared. Rollback buys certainty and closure, and the price of it is whatever the difference between the two methods turns out to be across the earlier years.
Does a rollback have to cover the same transactions as the agreement?
Yes, and this is the condition that most often limits it. A rollback extends the agreed method to the same international transactions, which means the earlier years have to be recognisably the same arrangement: the same parties, the same functions performed on each side, the same assets used and risks borne. Where a business reorganised, moved a function, changed a contract or added a new line of activity in the intervening period, the earlier year may not qualify even though it looks similar. Map the facts year by year before assuming the whole period is available.
Will the other country accept a rollback agreed in India?
Not automatically. A unilateral agreement binds the authority that made it and the taxpayer, and nobody else. If the agreed method increases the profit taxed in one country for an earlier year, the other country is not obliged to reduce its own tax on the same profit to match, and the result is the double taxation the exercise was meant to avoid. Where the arrangement is with an associated enterprise in a treaty country, a bilateral route or a mutual agreement procedure is what brings the other side in. Consider the counterparty's position before the rollback is requested, not after.
Should I ask for a rollback if those years are already under audit?
It is often exactly when people ask, but the sequencing needs care. An audit, an assessment already issued, an appeal in progress or a completed settlement each affect whether an earlier year can be brought into a rollback and on what terms, and the rules on this differ by country. There is also a practical conflict: the position you are arguing in the audit and the method you are proposing for the agreement need to be consistent, because both are on the record. Settle what you will say about the earlier years before you open the second conversation.
What documents does a rollback request rely on?
Chiefly the earlier years' own transfer pricing documentation, and its quality determines what is possible. For each year you need the functional analysis, the contracts then in force, the financial data of the tested party, and the comparables or benchmarking relied on at the time. The purpose is to show that the facts in those years match the ones the agreed method was built on. Where a year's documentation is thin or inconsistent with the others, that shows up during the request rather than quietly, so review the whole period for consistency before filing anything.
What is a totalization agreement and how do I use one?
A social security agreement that stops you contributing to two systems for the same work, and lets periods in both count towards benefit eligibility in either. Which system you stay in depends on the agreement's rules for your situation — a seconded employee usually remains in the home system for a set period, a locally hired one usually joins the host system. You evidence it with a certificate of coverage obtained before or shortly after the assignment starts. See certificates of coverage.
Branch or subsidiary — which should we use to expand?
A branch keeps one taxpayer: results consolidate at home, losses are usable sooner, and the exposure is that the branch is a permanent establishment whose profit the host country taxes, sometimes with a branch tax on repatriation. A subsidiary is a separate taxpayer with limited liability and local rates, at the cost of withholding on dividends home and transfer pricing on everything between them. The deciding facts are usually expected losses, liability and exit plans. See branch against subsidiary.
