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US IRS releases new advance pricing agreement template

Based on the received public comments on the draft Advance Pricing Agreement (APA) template of September 2017, the IRS Advance Pricing and Mutual Agreement Program (APMA) has released on May 11th, 2018 the new APA template. This template must be used when requesting an APA. This can also be the case for pending APA request, so make sure to check if this is the case.

The current version of the template continues to use an options-based format. IRS APMA believes this format will facilitate the submission and review of APA requests and the drafting of APA’s

The Advance Pricing Agreement (APA) program allows the taxpayer and the tax authority to avoid future transfer pricing disputes by entering into a prospective agreement, generally covering at least five tax years, regarding the taxpayer’s transfer prices. APAs specify:

  • Transactions covered by the APA
  • Transfer pricing method (TPM)
  • APA term
  • Operational and compliance provisions
  • Appropriate adjustments
  • Critical assumptions regarding future events
  • Required APA records
  • Annual compliance reporting responsibility
  • Bilateral vs. unilateral APAs

Taxpayers may enter into APAs with more than one tax authority – i.e., bilateral or multilateral APAs – through the mutual agreement procedure (MAP) included in most income tax treaties. Unilateral APAs involve agreements between only the taxpayer and one government.

Source: IRS