In Announcement 2017-3, 2017-15 I.R.B. 1, the US Internal
Revenue Service (IRS) released its annual report on advance
pricing agreements (APAs) for the 2016 calendar year. Fewer
APAs were executed than in the prior year, and it took slightly
more time to complete them. Of the 86 agreements executed in
2016, 37 were new APAs. This was a decrease from the 44 new
APAs executed in 2015.
Perhaps even more interesting is that almost 50% fewer APA
applications were filed in 2016 (98) compared with the previous
year (183). We wonder whether this might be a result of
European state aid assertions, Eaton's APA revocation, BEPS, or
a combination of these factors.
Advance pricing agreements executed with Japan constituted
54% of bilateral APAs. Canada accounted for another 20%. Thus,
nearly three quarters of the total number of bilateral APAs
executed in 2016 involved the US entering into mutual
agreements with either Japan or Canada. Only 9% of
identified-country APAs were with EU countries.
Of the bilateral APAs filed in 2016, 31% of involved Japan
and 34% involved India. No other country accounted for more
than 8%. Only 11% were filed regarding identified EU
There was also a surprising number of withdrawn APAs during
2016: 24. This was the most since 2002 when 26 were withdrawn.
In 2015, only 10 APA requests were withdrawn, and in 2014 only
one request was withdrawn.
Of the APAs executed in 2016, 76% were inbound APAs and 24%
were outbound APAs. In these percentages we have ignored the
"sister companies" category. Inbound APAs involve a non-US
parent and a US subsidiary, and outbound APAs involve a US
parent company and non-US subsidiary.
New unilateral APAs in 2016 took on average nearly three
years to be issued, and new bilateral APAs took over four years
on average to be issued. Renewal APAs in each case took a
somewhat shorter time. Unilateral APA renewals took slightly
short of two years and bilateral renewals took slightly short
of three years.
Jim Fuller (email@example.com)
and David Forst (firstname.lastname@example.org)
Fenwick & West