Advance Pricing Agreements

An Advance Pricing Agreement (APA) is an agreement between a taxpayer and at least one government tax administration on the transfer pricing methodology to be employed for specific transactions governing specific years. We can help you determine when an APA is right for you and when it is not in your best interest.

APAs offer both taxpayers and tax authorities the opportunity to take the guesswork out of transfer pricing and eliminate the potential for adjustments or penalties. As long as this methodology is followed, the taxpayer can be certain that there will be no transfer pricing adjustments or penalties for the covered transactions during the covered years.

APAs offer great benefits to a multinational corporation. The obvious benefit is that an APA can eliminate the potential risk of a transfer pricing adjustment or penalty. In addition, if a bilateral or multilateral APA is entered into, it can eliminate the possibility of double taxation.

While the APA was created to deal with transfer pricing issues in future years, in practice the process often involves reviewing historical years that are open to examination. Given this expansive nature of the APA program, there is potential for a taxpayer to sit down with the IRS (or foreign tax authority) and reach a fair agreement on transfer pricing covering a lengthy period of time.

Altus Economics have extensive experience in dealing with APAs, both from the taxpayer's point of view and from the IRS' point of view. We can provide you with the transfer pricing and economic support you need to negotiate a favorable APA.