6. Other MAP programs
6.2. Advance Pricing Arrangements (APAs)
Many competent authorities also deal with APA requests. APA programs assist taxpayers in determining, in advance, transfer pricing methodologies and their application to specific cross-border non-arm’s length transactions for specific periods of time, with the objective of avoiding double taxation that may otherwise occur. If an APA program is available, a taxpayer may request a bilateral APA with respect to specified cross-border transactions, which is conducted via the MAP article of a tax convention. Once concluded, bilateral APAs provide an increased level of tax certainty in both tax jurisdictions, thereby considerably lessening the likelihood of double taxation.
Bilateral APAs are becoming more popular because they proactively prevent disputes and over the long term are a cost effective tool for both taxpayers and governments. Many countries publish APA annual reports describing their programs and publicising statistical results to promote their use and ensure transparency in the process. For more details about the various APA programs available, please refer to the most current version of the OECD Country Profiles to obtain country specific guidance.
Best Practice Nº25: Implementing and Promoting ACAP and Bilateral APA Programs
Establishing and actively promoting ACAP and APA programs will reduce the number of international tax disputes and provide taxpayers and tax administrations with greater tax certainty. Mature ACAP and APA programs have provided taxpayers with an effective alternative to the typical MAP process.