There are 3 types of advance pricing arrangements (APAs):
Bilateral APA
A bilateral APA is an arrangement between our competent authority (CA) and the CA of a tax treaty partner country. The Australian CA is a specifically delegated position within the ATO and is authorised to negotiate bilateral APA cases.
The respective CAs enter into an APA under the mutual agreement procedure (MAP) article of the relevant tax treaty.
The CA of each treaty partner country confirms the terms of the APA in writing through a letter or similar document with their resident taxpayer and agrees to be bound by those terms.
A bilateral APA will give a similar assurance to the foreign entity dealing with the tax administration at the other end of the transaction.
Multilateral APA
A multilateral APA is an arrangement between the relevant taxpayers, the ATO CA and the CAs of more than one tax treaty partner and binds all the parties.
Unilateral APA
An APA between the taxpayer and the ATO is referred to as a unilateral APA where the APA does not involve or require agreement with the CA of a tax treaty partner country.
A unilateral APA will provide you with an assurance that we accept the treatment you gave to the covered dealings during the periods of the APA.
Economic double taxation can arise under a unilateral APA where the tax administration of the foreign country forms a different view of the application of the arm's length principle to the cross-border dealings covered by the APA.
If there is a tax treaty between the foreign country and Australia, the Australian CA will seek to support the transfer pricing outcomes of the unilateral APA during CA discussions.