IRS Reports Uptick In Advance Pricing Agreements

by Mike Godfrey, Tax-News.com, Washington

06 April 2018

The US Internal Revenue Services (IRS) has released its annual report on the number of advance pricing agreements (APAs) and applications and made during the 2017 calendar year.

An APA is an agreement between a taxpayer and the IRS which sets an agreed method for pricing goods and services purchased or sold cross-border between a taxpayer and a related party (usually another member of the taxpayer's group).

The IRS has reported that the number of APAs executed in 2017 was 116 (30 unilateral, 85 bilateral, and one multilateral), bringing the total number of APAs executed since the APA program started in 1991 to 1,713. Of the 116 agreements executed in 2017, 40 percent were new APAs.

Nearly three quarters of the total number of bilateral APAs executed in 2017 involved the United States entering into mutual agreements with either Japan or Canada. The number of pending APAs has continued to decline since 2015 with Japan, India, and Canada accounting for more than half of all pending bilateral APAs.

As in prior years, more than half of the APAs executed in 2017 involved transactions between non-US parents and US subsidiaries.

Although most of the transactions covered in APAs executed in 2017 involve the sale of tangible goods and the provision of services, over 20 percent covered the use of intangible property.

The median time required to complete an APA in 2017 increased slightly to 33.8 months versus 32.8 months in 2016.

TAGS: tax | India | accounting | tax authority | agreements | advance pricing agreement (APA) | Canada | United States | Japan | services

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