The main benefits of an APA include: – the prevention of tax controls for APA-covered transactions (reducing costs and related efforts) and eliminating any transfer pricing adjustments: – removal of late interest and penalties for possible transfer pricing adjustments; Eliminating the costs of establishing the transfer pricing record for APA-covered transactions (during the period during which the APA is in effect); Avoid double taxation. On 27 March 2020, the Russian Ministry of Finance published an updated version of the bill “On the amendment of the first part of the Russian tax code to improve price tax control and the procedure for concluding advanced price agreements” (hereafter the “Bill”). Bilateral and multilateral APAs are generally bilateral or multilateral, i.e. they also enter into agreements between the subject and one or more foreign tax administrations under the control of the Mutual Agreement Procedure (POP) under the tax treaties.  The subject benefits from such agreements, since he is assured that income from covered transactions is not subject to double taxation on the part of the IRS and the relevant foreign tax authorities. The IRS policy is to “encourage” taxpayers to apply for bilateral or multilateral APA where there are provisions of the competent authority. AAAs – in the aforementioned sense – find their legal basis in the Double Taxation Conventions (DBA), in the respective articles on mutual agreement procedures. Germany has concluded DBA with more than 90 countries in the world. Most of these DBAs follow the OECD`s draft international agreement. The provisions on mutual agreement procedures are set out in Article 25, paragraphs 1 to 3, of the OECD Model Convention. 6. The possibility of extending the provisions of an APA to a period ranging from the first day of the calendar year during which the subject first applied for an APA until the APA came into force if, after reviewing the first application, an APA was refused on the grounds that no agreement was reached between the tax authorities of a foreign counterpart.
Download our transfer pricing brochure for details The APA is used to define tax debt between two or more states for a specified period of time.