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HMRC internal manual

International Manual

Transfer pricing: methodologies: Advance Pricing Agreements: types of agreement


  1. A binding agreement between a UK business and HMRC in accordance with Section 218, TIOPA 2010, is referred to as a “unilateral APA”. Although this agreement confirms the tax treatment in the UK, it does not determine how the issues are to be resolved in any other country involved. Consequently, it does not normally eliminate the risk of double taxation in relation to the transfer pricing issues it addresses. In order to achieve that comprehensively in the case of cross-border transfer pricing issues where a Double Taxation Agreement (“DTA”) exists between the UK and the other country containing a Mutual Agreement Procedure article, HMRC would have to reach agreement also with the Administration of the other country: this is referred to as a “bilateral APA” or “MAP APA”.
  2. Businesses operating in several countries may wish to seek APAs that involve all the relevant Administrations affected by the transfer pricing issues. The term, “multilateral APA,” has been used to describe such agreements, but there is no discrete mechanism for reaching multilateral agreements, and multilateral APAs are strictly multiple and complementary bilateral APAs.
  3. Multilateral agreements may be more appropriate where there is essentially only one activity, but several enterprises or parts of enterprises contribute to it. For example, where an enterprise of the UK is engaged in global financial trading through branches in countries X and Y, it may be appropriate for similar agreements to be reached between HMRC and country X and HMRC and country Y in order to determine how the profits from the activity are to be allocated to each of the three countries in order to eliminate double taxation. In such a situation HMRC will adapt the bilateral framework in order to reach agreement on a trilateral basis, subject to the acquiescence of the other Administrations and any constraints on exchanging information imposed by the relevant DTAs. This may include use of multilateral instruments for exchanging information.
  4. HMRC expects that APA applications are bilateral rather than unilateral except where:
    • The other party to the transaction is resident in a jurisdiction with which HMRC has no treaty or where HMRC is aware that the treaty partner has no APA process; or
    • HMRC consider there is little extra to be gained by seeking a bilateral agreement. For example where the UK is at the hub of arrangements with associated enterprises in many different countries and where the trade flows involved with any one particular country are relatively modest in scale.
  5. As unilateral APAs are generally of less value to both HMRC and potential applicants and provide less transparency, applications for unilateral APAs are less likely to be accepted into the APA programme. However each case will be considered on the basis of its facts and features.
  6. HMRC’s ability to give effect to a mutual agreement reached with a treaty partner to eliminate double taxation under the terms of a treaty will not be restricted by the terms of a unilateral APA. Any APA agreement reached will be exchanged with relevant treaty partners and other parties in accordance with HMRC’s exchange of