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Ireland Explains New Bilateral APA Program

by Jason Gorringe,, London

27 June 2016

The Irish Revenue has issued taxpayer guidance on the country's bilateral advance pricing agreement (APA) program, which is due to take effect from July 1, 2016.

The Government is introducing a formal bilateral APA program to implement the proposals contained in Action 14 of the base erosion and profit shifting project and to provide greater certainty in relation to the taxation of cross-border transactions entered into by multinational corporations. Until now, Ireland accepted requests for bilateral APAs on an ad hoc basis in situations where a tax treaty partner agreed to enter into a bilateral APA negotiation.

Revenue eBrief No.60/2016, released on June 23, 2016, discusses the five different stages involved in the formal APA process, including pre-filing, formal APA application, evaluation of an APA application and the negotiation of an APA, formal agreement, and annual reporting. The guidance also provides details on administering an APA, such as provisions relating to audit, consequences of non-compliance (that is, revoking or cancelling APAs), and making renewal requests.

According to the guidance, the bilateral APA program is intended to apply in respect of transactions involving complex transfer pricing issues, such as where there is significant doubt over the appropriate application of the arm's length principle, or where, for any other reason, there would otherwise be a high likelihood of double taxation. The guidance notes that an APA will be granted in respect of a specific fixed period of time, typically between three and five years and that the tax authority will provide for the "roll-back" of APAs in appropriate cases.

The guidance emphasizes that the tax authority will endeavor to conclude bilateral APA cases within 24 months of receipt of the formal bilateral APA application from the taxpayer but stresses that the timeline will vary depending upon the complexity of the case, the cooperation of the taxpayer, and the number of rounds of negotiations required. The guidance also clarifies that there is no application fee for entry into the bilateral APA program, although, depending upon the jurisdiction, a fee may be charged by the other tax administration involved in the negotiation of a bilateral APA.

The guidance states that the bilateral APA program is voluntary and taxpayers can choose whether or not to enter into it. It further states that the tax authority is under no obligation to accept a request from a taxpayer for a bilateral APA and may, following consultation with the competent authority of the foreign tax administration, terminate consideration of the APA request at any time prior to conclusion of the APA.

TAGS: compliance | tax | investment | business | double tax agreement (DTA) | tax compliance | Ireland | tax avoidance | revenue guidance | law | accounting | Organisation for Economic Co-operation and Development (OECD) | audit | enforcement | ministry of finance | tax authority | agreements | multinationals | legislation | tax planning | transfer pricing | advance pricing agreement (APA) | G20 | tax reform | regulation | trade | European Union (EU) | Europe | BEPS

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