Negotiating Advance Pricing Arrangements

In the United States, the Advance Pricing Agreement (APA) program was established in 1991 and is generally recognized as a mature and stable program that has provided taxpayers with an extremely valuable, non adversarial alternative to resolve transfer pricing disputes. Following the United States, other countries adopted and now have well established APA programs, including Australia, Belgium, Canada, Colombia, France, Germany, Japan, Korea, Mexico, the Netherlands, New Zealand, the United Kingdom and several others. In 1996, the OECD issued Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and included a chapter on APAs. More recently, the Pacific Association of Tax Administrators (PATA) (whose members include Australia, Canada, Japan and the United States) issued guidance on bilateral APAs. Italy has finally joined this group of countries by adopting in 2004 its version of APA program named “international tax ruling”, which extends to transfer prices, tax treatment of cross border interest, dividends and royalties, attribution of profits to a PE and other transfers of values to or from foreign persons and issued specific guidance on the procedure leading to the agreement with the tax administration.

If you are evaluating how or whether to seek an APA in Italy or abroad, we can help you:

• determine the most appropriate and advantageous APA transfer pricing methodology for your situation;
• prepare the APA application, including gathering the historical and financial information necessary for the APA analysis;
• engage an economist, if necessary, and oversee preparation of economic analysis;
• negotiate the terms of the APA with the tax administration;
• negotiate renewals or amendments of APA for future years.