What is Advance Pricing Agreement? How long the agreement is valid? Can the agreement be declared as void during the agreement period?

Advance Pricing Agreement (APA): An Advance Pricing Agreement (APA) is an agreement between a taxpayer and the tax authority (Central Board of Direct Taxes - CBDT) that determines, in advance, the arm's length price or specifies the manner in which the arm's length price is to be determined, for an international transaction or specified domestic transaction to be entered into by that person. It aims to provide certainty to taxpayers regarding their transfer pricing arrangements and reduce litigation. Validity Period of APA: The Advance Pricing Agreement shall be valid for a period as specified in the agreement. However, this period will not be more than five consecutive previous years . Can the agreement be declared as void during the agreement period? Yes, the Board (CBDT) may, with the approval of the Central Government, by an order, declare an agreement to be void ab initio (from the beginning) if it finds that the agreement has been obtained by the person by fraud or misrepresentation of facts . This provision ensures that APAs are based on accurate and truthful information.