Facilitating successful Advance Pricing Agreements for US-based multinational enterprises

August 2013
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Facilitating successful Advance Pricing Agreements for US-based multinational enterprises

At a glance

Advance Pricing Agreement (APA). In the United States, recent administrative and organizational changes in the IRS have resulted in a more practical and efficient APA process. Corporate taxpayers should re-evaluate the benefits and opportunities afforded by an APA given this new environment.

With almost three-quarters of all international trade conducted between related parties, according to data published by the United Nations Conference on Trade and Development, companies around the world are looking for certainty and transparency in their dealings with tax authorities with respect to pricing and structuring their intercompany transactions, referred to as transfer pricing. Available in many jurisdictions, an Advance Pricing Agreement (APA) allows multinational enterprises to resolve prospectively transfer pricing matters in a principled and cooperative manner with one or more tax authorities. In the United States, recent administrative and organizational changes in the Internal Revenue Service (IRS) have resulted in a more practical and efficient APA process. Corporate tax personnel and their advisors should carefully evaluate the benefits and opportunities afforded by an APA with respect to resolving potential tax controversies proactively.