– In 2018, 203 APP applications were filed and 107 APAs were finalized. The number of APA completed in 2018 represents a significant number. In addition, over the past two years, the bilateral APA with India1 (which accounted for 21% of APA`s bilateral submissions in 2018 and 21% respectively in 2017) has been the subject of constant interest as a result of the recent improvement in relations between the IRS and the Indian tax administration. Where relevant authorities` procedures are available in the other countries concerned (as part of an effective tax treaty), the IRS favours bilateral or even multilateral APAs. These agreements are also binding on the foreign tax administration for the same period and help to avoid cases of double taxation. The APA is an agreement between a tax payer and the tax administration of a state to create a prior guarantee with respect to the transfer pricing method. APAs simplify or prevent costly and time-consuming tax controls in contentious transactions. The report shows that AAPs are still of great interest: in 2018, taxpayers filed 203 APP applications, up from 101 in 2017. The total number of completed APAs increased from 116 to 107 and the median period until the close of the APA increased slightly from 33.8 months to 40.2 months. The APA model used by the IRS contains a critical default assumption that there will be no substantial change in the tax or financial accounting activity or practices of the tax or financial accounting practices during the life of the APA, and all AAPs implemented in 2018 contained this critical assumption by default. The IRS Advance Pricing and Mutual Agreement (APMA) released the 19th Annual Advance Pricing Agreement (Report) released on March 22, 2019 in the 2019-03 announcement.
The report provides an updated discussion on the APA program, including its activities and structure for calendar year 2018, provides a useful overview of how the program works and provides some guidance on what APA applicants can expect. The total number of 203 includes the number of full applications filed each year and bilateral applications received from abroad in 2018.