Rule 104 — Persons eligible to apply.
The rule states who may apply for an advance pricing agreement. A person shall be eligible to enter into an agreement under these rules if he has undertaken an international transaction, or is contemplating to undertake an international transaction.
An agreement fixing the arm's length price in advance is only useful if it can be sought before the transaction happens, but it must also be open to a person already transacting. The rule settles the eligibility question at that width and no wider: the gateway is an international transaction, undertaken or contemplated, and nothing else about the person is made a condition.
The two limbs are alternatives, so a person need not wait until the transaction has been entered into and need not have a completed year behind him: contemplating an international transaction is enough. What the rule does not do is make eligibility a right — it fixes who may apply, while the procedure, the terms and the acceptance of the application are governed by the other rules on the agreement. The gateway is an international transaction; a specified domestic transaction is not mentioned.
A company that has been importing components from its overseas parent for several years and a company that has only signed a term sheet for a new intra-group service arrangement are both eligible — the first because it has undertaken an international transaction, the second because it is contemplating one. A company whose only related party dealings are with a domestic group entity is not brought in by either limb.
You meet it at the threshold of the advance pricing agreement process, when the application is made and the question is whether the applicant is a person eligible to enter into an agreement under these rules.
A person shall be eligible to enter into an agreement under these rules, if he— (a) has undertaken an international transaction; or (b) is contemplating to undertake an international transaction.