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APA from international perspective


Many countries have added to their tax codes far-reaching and very strict regulations to prevent tax-avoidance strategies, at least since the Organisation for Economic Cooperation and Development (OECD) passed the BEPS Action Plan in 2015.


Although the OECD suggested its own comprehensive solutions, the implementation strategies differ significantly by country not only in respect of the legal framework but also in how tax authorities construe and apply the laws. At the same time, legislation applicable to international transactions has grown and become more complex. Modern opportunities have also contributed to the complexity of tax aspects of transactions: be it because entities that form a value added chain are scattered around the world and work together owing to completely new forms of collaboration, or because of new, especially digital, business models.


The correct application of the ever more complex tax laws to the ever more complex facts and circumstances is becoming increasingly difficult or even impossible. This applies also to international transfer pricing which add yet another dimension to transactions and require business understanding. So it is no wonder that assessments of facts and circumstances vary and tax authorities infer various tax implications from them. Consequently, the number of double taxation cases and arbitration proceedings has been growing for years. This is exactly what hinders competition and international trade. That is why, in its BEPS Action Plan OECD has emphasised the need to streamline mechanisms of international dispute resolution and has proposed measures to eliminate disputes.


One of the available options is an Advance Pricing Agreement, or APA in short. It is an agreement between a taxpayer and a tax authority on how to set transfer prices in specific transactions (e.g. a licence to intangible assets). In this way, taxpayers and tax authorities obtain certainty as to transaction planning because the tax treatment of the transaction is agreed in advance. Advance Pricing Agreements may be unilateral (that is, between a taxpayer and the tax authority in the country of its establishment), as well as bi- and multilateral (between corporate group members transacting under the same circumstances and tax authorities of a certain state).


So far, due to the costs and duration of the proceedings (which may take years), bi- and multilateral advance pricing agreements used to make real sense only for large enterprises and complex transactions. However, less complicated transactions ("small cases") are now gaining popularity.

The following paragraphs describe this topic in international context.







How many Advance Pricing Agreements are signed in Germany every year?

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Costs of an Advance Pricing Agreement (APA)

In addition to consulting services, you have to pay application fees. The fee for a new application is currently 20 thousand euro and 15 thousand euro for a renewal. The 2020 Tax Act increases the fee for new applications to 30 thousand euro and leaves the fee for renewals unchanged. The fee may be reduced if certain requirements are met.

Reasoning for applying for an Advance Pricing Agreement (APA)

Businesses apply for APAs often because they want to achieve legal certainty. It allows safe planning because as long as a company follows the agreement, it will avoid double taxation and unexpected tax assessments or revised transfer pricing methods.  Moreover, tax authorities’ inspections of transfer prices are less bothersome and shorter. However, due to the duration and costs of the proceedings, APAs are contemplated only in more complex circumstances that pose greater risks.

Amended legislation on APA proceedings

The 2020 Tax Act introduced domestic APA regulations for the first time. They used to be legally based on double taxation avoidance agreements. Importantly, such agreements may be signed only if there is a risk of double taxation in given circumstances and it is likely to be avoided by way of an Advance Pricing Agreement on the interpretation of law with the tax authority of a Contracting State. An Advance Pricing Agreement may be made if the applicant consents and waives legal remedies against tax assessments if they correctly implement the agreement provisions in the agreed period (waiver of legal remedies).



Michael Scharf
T +49 911 9193 1070






How many Advance Pricing Agreements are signed in Spain every year?

The table below shows details about Advance Pricing Agreements in Spain. It has been published by the EU Joint Transfer Pricing Forum.

 (source: KOMISJA EUROPEJSKA, DYREKCJA GENERALNA DS. PODATKÓW I UNII CELNEJ, Podatki bezpośrednie, Koordynacja podatkowa, Analiza ekonomiczna i ocena, Polityka i Współpraca w dziedzinie Podatków Bezpośrednich, Wspólne Forum UE ds. cen transferowych, Statystyki dotyczące uprzednich porozumień cenowych w UE pod koniec 2018 r. i z lat poprzednich, począwszy od 2007 r.) 


How much does an Advance Pricing Agreement cost in Spain?

Spanish tax authorities do not charge for an Advance Pricing Agreement. The only costs of an APA in Spain are the costs of consulting (if it is needed).

Good to know

The table above indicates that Spanish tax authorities are willing to enter into Advance Pricing Agreements to ensure legal certainty of solutions employed by businesses that invest in Spain and multinational enterprises from Spain which plan investments abroad.

 In this way, that is by signing an Advance Pricing Agreement, tax authorities try to reduce the number of court disputes and, at the same time, secure their gross taxable base and the right to collect the tax.

Why do clients go for an Advance Pricing Agreement?

The APA enjoys popularity among clients who want to adjust transfer prices within the group at the end of the year and those who want to make sure that their transfer pricing rules are legally correct and thereby avoid TP adjustments following tax inspections.



Mariana Robles

+34 915 33 38 20





How many Advance Pricing Agreements are signed in China every year?

Due to limited resources of the State Tax Administration of the People’s Republic of China, the number of applications for Advance Pricing Agreements there is limited.

 In 2018, Chinese tax authorities signed a total of 9 APAs, of which 2 were unilateral and 7 bilateral.

How much does an Advance Pricing Agreement cost in China?

Advance Pricing Agreements are free of charge in China.

Why do clients go for an Advance Pricing Agreement?

For tax certainty. An Advance Pricing Agreement may be signed for 3 to 5 years starting from the year in which Chinese authorities formally approve the letter of intent. Moreover, if a company made in the past similar or the same transactions with associated enterprises as those covered by an APA, at the company’s request tax authorities may retroactively apply the transfer pricing rules and methods set in the agreement to check and adjust prices applied in the past transactions with associated enterprises. This option may reach back up to ten years.

Good to know

The State Tax Administration of the People’s Republic of China issued on 11 October 2016 Public Announcement [2016] no. 64 which describes the application process for an Advance Pricing Agreement in China and the related requirements. According to that announcement, the application process consists of 6 stages: initial meeting, letter of intent, review and examination, formal application, negotiations and agreement signing, as well as implementation and supervision. Interestingly, the review and examination take place before the formal application, and enterprises are obliged to adjust their transfer pricing methods at this stage. This may affect bilateral and multilateral advance pricing agreements. Public Announcement no. 64 sets out also specific criteria for accepting or rejecting an application for an APA. Enterprises are obliged to actively cooperate with tax authorities and prepare/file required documents on time to be allowed to submit a formal application. Importantly, Public Announcement [2016] no. 64 sets out further requirements to be met to enter into an Advance Pricing Agreement, including an analysis of benefits of the location, such as the market premium and savings made thanks to the location, and a review of value added chain.



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Judy Zhu
Senior Associate, Tax Consultant
+86 21 6163 - 5361






How many Advance Pricing Agreements are signed in the USA every year?

The America’s IRS (Internal Revenue Service) publishes every year a report on the Advance Pricing Agreements it has made and presents its activities under the Advanced Pricing and Mutual Agreement Program, APMA. Here is an extract from the 2019 report.

Lower number of applications for Advance Pricing Agreements

In 2019, the IRS received about 40% fewer applications than in 2018, specifically they received 121 applications for Advance Pricing Agreements (17 unilateral, 96 bilateral, and 8 multilateral), whereas the number of applications in 2018 was 203. Moreover, as of 31 December 2019, the IRS received 29 applications for assessment of APA fees under the APMA program, not yet accompanied by complete applications for APA. This was less than half of the applications for fees compared to 2018.

Small increase in the number of completed applications for APA

In the calendar year 2019, under the APMA program the IRS signed 120 Advance Pricing Agreements (29 unilateral and 91 bilateral) while the number totalled 107 in 2018. Out of those 120 agreements, 68 (about 57%) were renewals of which 20 were unilateral and 48 bilateral. About 25% of all Advance Pricing Agreements concerned periods before signing the APA (so-called rollbacks).  the number of transfer pricing audits conducted by the IRS or the tax authorities of the Contracting State dropped significantly most probably thanks to the Advance Pricing Agreements.

Contracting States which have entered into bilateral Advance Pricing Agreements

The greatest number of applications in 2019 (32%) for bilateral Advance Pricing Agreements was filed in Japan. Canada ranked second with 12% of the applications. Applications concerning India accounted for 12%, which represented a drop by 9% compared to 2018. Other countries in respect of which a significant number of applications has the status of “filed”, “pending” or “resolved” include Australia, France, Germany, Italy, Korea, Mexico, Switzerland and the United Kingdom.

How much does an Advance Pricing Agreement cost in the USA?

Fees for Advance Pricing Agreements are set in an Appendix to Revenue Procedure 2015-41. They are going to be raised in two stages:

1. As regards applications for Advance Pricing Agreements filed after 30 June 2018, the fees will go up as follows:


  • 86,750 dollars for a new Advance Pricing Agreement
  • 48,500 dollars for a renewal of an Advance Pricing Agreement
  • 42,000 dollars for less complex transactions (“small cases”)
  • 17,750 dollars for an amendment to an Advance Pricing Agreement

2. As regards applications for Advance Pricing Agreements filed after 31 December 2018, the fees will go up as follows:


  • 113,500 dollars for a new Advance Pricing Agreement
  • 62,000 dollars for a renewal of an Advance Pricing Agreement
  • 54,000 dollars for less small cases
  • and 23,000 dollars for an amendment to an Advance Pricing Agreement

Why do clients go for an Advance Pricing Agreement?

An Advance Pricing Agreement is an agreement between the IRS and the taxpayer whereby the IRS undertakes not to request a TP adjustment in line with Article 482 of the US Internal Revenue Code in respect of a single or multiple transactions covered by an APA if the taxpayer files a tax return for the year covered by an APA based on the agreed transfer pricing methods. The APA proceedings are voluntary and aim at solving existing and potential transfer pricing disputes based on specified rules and the principle of cooperation, which is an alternative to the traditional dispute resolution.

Our experience shows that the costs and time-consuming procedures allow only the large, multinational corporations to employ the APA in dispute resolution. Generally speaking, businesses do not want to be bound by transfer prices set in an APA for many years.

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Oliver Hecking
Steuerberater, CPA
+1 704 831-3565


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Dominika Tyczka-Szyda

Tax adviser (Poland)


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