Advance Pricing Agreement Timeline

There are some factors that cause difficulties in the AAP agreement with the DGT: yes, the APA program is independent of the audit function of the tax authorities and the relevant authorities that deal with other cases of double taxation. All of the subject`s documents are returned to the subject if the subject`s application for APA is not approved or cancelled by the DGT. The DGT may not use documents for tax audit and tax investigation purposes during the APA process. The cases of the mutual agreement procedure were handled by the Directorate of International Taxation. Does the country have a pre-price program (APA)? If so, is the program widespread? Are there unilateral, bilateral and multilateral APAs? The German tax authorities regularly conclude bilateral and multilateral APAs (unilateral decisions on transfer pricing with effect in the future are granted only in exceptional circumstances). AAPas are an increasingly widely used tool: 56 APP requests were sent to German tax authorities in 2018 and 43 bilateral and multilateral APAs are in effect according to the EU Joint Forum on Transfer Prices at the end of 2018. After the APA takes effect (which also requires the agreement of the subject and the waiver of the right of appeal) and at the request of the subject, the local tax authority must make a binding decision reflecting the agreement reached in the APA. The main advantages of ASAs are minimizing transfer pricing disputes, ensuring legal certainty and easing the calculation of taxes. AAPAs are handled by specially trained staff from the Federal Office of Taxation (also responsible for mutual agreement procedures) who will coordinate cases with the relevant local tax authorities involved in the APP process and will often prepare the technical analysis. This coordination can simplify future processes and audits and optimally create an open and collaborative relationship between all parties involved.

However, from the point of view of the subject, it should be taken into account that, according to the general rules of procedure, the tax authorities can use all the information obtained in an APA procedure to the detriment of the subject and even if, in the end, no APA is concluded. The main advantage of an APA is the creation of planning and legal certainty with respect to transfer pricing issues, which avoid future (expensive) conflicts, simplify future processes and audits, and avoid the interest rate in the event of late payment. However, from the subjugation`s point of view, the flip side of such planning security is the restriction of freedom of enterprise, since the binding effect of the APA requires the effective implementation of the underlying facts and circumstances. Other drawbacks may be the initial cost of an APA, which takes a lot of time and can commit internal and external resources. In principle, any transfer pricing against internationally related parties can be covered by an APA. The details of the specific case are usually discussed at the pre-notification meeting. Regulation 22/PMK.03/2020 of the Prime Minister on the procedure for implementing the pre-price agreement (PMK-22) defines the procedure or procedures for obtaining an APA in the next two major steps. All types of related party transactions may be covered by ASAs, including tangible and intangible assets, related services, cost-sharing agreements and financial transactions covering the guarantees and revenue allocation of a financial institution involved in the global trading of financial instruments. The DGT is open and ready to optimize APAs to avoid double taxation and base erosion and profit transfer.