Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘APA’

European Commission releases 2012 APA & MAP statistics

The EU Joint Transfer Pricing Forum has released statistics for pending Mutual Agreement Procedures (MAPs) and APAs under the Arbitration Convention.

The MAP comparables provide interesting observations for countries in which there is no activity in contrast to active case developments in France, Germany, and the UK.  The average cycle time noted in several countries ranges from 9 to 47 months, which presents additional challenges in timely case resolution.  Reasons provided for cycle time variations included 24% being waived for the time limit with taxpayer’s agreement, 16% pending before court and 15% settled in principle, waiting exchange of closing letters for MAP.

The APA statistics reflect 222 EU and 168 Non-EU APAs in force at the end of 2012, 561 EU and 119 Non-EU APA requests in 2012, while 353 EU and 85 Non-EU APAs were granted in 2012.

Click to access jtpf_012_2013_en.pdf

Click to access jtpf_013_2013_en.pdf

The statistics for seeking resolution via the EU Arbitration Convention provide additional insight for evaluation of issues that are not being settled effectively at the local country level.

 

Category:

Transfer Pricing

Tagged with:

China APA Report 2012: More APAs

http://www.chinatax.gov.cn/n8136506/n8136608/n9947993/n9948014/n12360820.files/n12360827.pdf?goback=%2Enmp_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1#%21

THe 2012 Annual Report outlines China’s Advance Pricing Agreement (APA) process, in addition to statistics for 2005 – 2012.  The agenda of the report includes:

  • APA Program definition and advantages
  • Legislation and Development of APA program
  • APA Procedures
  • Taxpayers’ Rights
  • Statistics and Contacts
  • Appendices, including formal meetings and applications

A Best Practices methodology addressing APA’s should be outlined in the global Tax Risk Framework for every multinational corporation.  This methodology will summarize some of the following points:

  • A description of the decision matrix for an APA and its implementation
  • Preference for unilateral or bilateral APAs
  • Implementation of global/regional/country proactive and/or reactive risk management tools
  • Outline of significant jurisdictions, timelines, work plan, and accountability for implementation
  • Integral coordination with tax counsel, and other functional business units
  • Review plan for an APA methodology in today’s rapidly changing tax environment (evidenced recently by the change in administrative leadership for the India APA program)
  • Review of applicable gaps that may exist to retrieve information readily for proactive, or reactive, APAs

Tax jurisdictions, and MNEs, are increasing their focus on APAs amidst a trend of growing uncertainty and complexity in international transfer pricing principles.  The China APA Report provides good preparation for a better understanding of the complex, and lengthy, preparation needed by all parties to obtain an APA.

Category:

Tax Risk Management, Transfer Pricing

Tagged with:

OECD Country MAP Profiles & Statistics – Valuable tools

http://www.oecd.org/ctp/dispute/countrymapprofiles.htm

http://www.oecd.org/ctp/dispute/mapstatistics20062011.htm

The links provide reference to the OECD Country MAP Profiles and MAP Statistics 2006-2011.  The OECD MAP content provides valuable information that should be included as an integral component of audit risk strategies.

The Country MAP Profiles provide the following content for OECD member countries, in addition to Argentina, People’s Republic of China, Russia, and South Africa:

  • Competent Authority contact information
  • Organisation of the Competent Authority
  • Scope of MAP & MAP Advance Pricing Arrangements (APAs)
  • References to domestic guidelines and administrative arrangements
  • MAP request content, timelines, fees and documentation requirements
  • Provisions on tax collection, penalties and interest pending outcome of the MAP process
  • Other dispute resolution mechanisms, and
  • Links to websites for the relevant jurisdiction.

The MAP Statistics include information on MAP inventories, cases initiated, completed, withdrawn, and average cycle time.  These statistics are provided for the OECD member countries and some non-OECD economies.  This information is very helpful in reviewing the trend of MAP filings in relevant jurisdictions.  There were 3,838 open MAP cases by OECD member countries at the end of 2011, with an average completion time of 25 months.

The OECD Forum on Tax Administration (FTA) convenes later this year to discuss Best Practices for improving MAP: refer to prior post 27 June 2013.

With the increase of transfer pricing controversies that are inherently complex and subjective in nature, MAP is a tool that is being used more frequently worldwide.  Examples of Best Practices to strategize MAP are provided for insight:

  • Document domestic and bilateral/multilateral avenues of appeal upon commencement of an audit to facilitate advance planning.
  • Review Double Tax Treaties for relevant Arbitration provisions that are providing an impetus for some jurisdictions to finalize negotiations.
  • Determine the interplay of domestic appeals (informal settlement, formal Appeals, Court filings, etc.) with MAP early in the audit process.
  • Outline deadlines for domestic appeals, MAP and other bilateral/multilateral tools (i.e. EU Arbitration Convention)
  • Develop a pro-forma multilateral calculation to strategize solutions minimizing double taxation.
  • Ensure MAP and other appeal strategies are integrated in the Tax Risk Framework.

    OECD Map with accession (green) and discussion...

    OECD Map with accession (green) and discussion (pink) countries added (Photo credit: Wikipedia the relevant jurisdictions)

Category:

Audits, OECD / UN, Tax Risk Management

Tagged with: