Are pre-price agreements with tax authorities possible in your jurisdiction? If so, what form do they generally take (for example. B, unilaterally, bilaterally or multilaterally) and what companies and transactions can they cover? APAs may cover any type of transaction subject to U.S. transfer pricing rules, as well as income allowances attributable to U.S. institutions. There is no limit to the types of entities that can apply for an APA. For more details on the types of tax payers who apply for AAP, the types of transactions registered, agreed transfer pricing methods and for details, see the annual APA report submitted by the Internal Revenue Service (IRS) (see IRS notification and report on pre-price agreements, March 27, 2017). There are many advantages to getting an APA. The APA provides security for transfer pricing issues that might otherwise lead to lengthy disputes with the IRS or foreign tax authorities. APAs can offer a particularly cost-effective solution by providing a high level of security for multiple fiscal years. By ensuring this security, APAs have the added benefit of using financial statements.
Another advantage of AAP is the provision of specific back-track procedures that allow the agreed APA method to be applied to resolve outstanding transfer pricing issues in previous open tax years, including issues already under consideration. In addition, bilateral and multilateral APAs resolve transfer pricing issues, both in the United States and in one or more foreign legal systems, on a coordinated basis, avoiding double taxation. APAs may cover transfer prices for transactions with all related parties, including transfers of intangible assets and assets, intercompany services, CSAs and financial transactions, including guarantees and income allocation of a financial institution involved in the global trading of financial instruments. In addition to traditional transfer pricing issues, ASAs may also cover some other tax issues for which compensation principles may be relevant, as well as incidental issues. How long does it usually take to reach a price agreement? The APA focuses on the agreement between the tax authorities and the implementation of the approved transfer pricing method (TPM). A TPM usually provides a number of arm length results and not a single result. In general, the majority of APAs use the comparable gain method (CPM) as tPM. Less often, an APA will use one of the traditional transfer pricing methods recognized by most member countries of the Organisation for Economic Co-operation and Development – such as a comparable uncontrolled price, resale price or cost-plus methods – or some other methods (for example. B a reasonable sharing of profits) that were accepted as the fourth method. The U.S. APA rules and procedures are defined in the 2015-41 income procedure, 2015-35 IRB 263 (August 31, 2015). However, it is possible that a subject may be able to negotiate a unilateral APA involving only the taxpayer and the IRS.
In this case, both parties negotiate an appropriate TPM only for U.S. tax purposes. If the taxpayer is involved in a dispute with a foreign tax authority over the registered transactions, he can apply for a discharge by asking the competent US authority to initiate a procedure of mutual agreement.