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HMRC internal manual

International Exchange of Information Manual

What is a ruling: Definition of an advance pricing arrangement

IEIM520200: What is a ruling? Definition of an advance pricing arrangement


Both Action 5 and the DAC require the exchange of APAs and advance thin capitalisation agreements (ATCA). The full guidance on APAs and ATCAs is in the transfer pricing guidance (INTM410000).


As a starting point you should assume that all APAs and ATCAs agreed by HMRC, whether they are bilateral or unilateral, fall within the OECD and the DAC definitions.  There are slight differences between the precise Action 5 and the DAC definitions of an APA as outlined below, but those differences are not sufficient to displace that core principle.

The same applies to APAs concerning the attribution of profit to permanent establishments (IEIM541320).


Under Action 5

The definition of APA is that used in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations as:

“…an arrangement that determines, in advance of controlled transactions, an appropriate set of criteria … for the determination of the transfer pricing for those transactions over a fixed period of time.”


Under the DAC

APAs are defined at paragraph 15 of Article 3 of the Directive. 

Broadly they are defined as an agreement or communication that determines an appropriate set of criteria for the determination of the transfer price of cross-border transactions between associated enterprises.  The definition also includes the attribution of profits to a permanent establishment.

The definition of associated enterprises has similar language to that of Article 9 of the OECD Model Tax Convention.  If, for the purposes of UK transfer pricing legislation, enterprises are associated, then they will be associated for the purposes of the DAC.

There is more guidance about transfer pricing in the International Manual and advance pricing arrangements in the statement of practice