US Inbound: New APA report

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2026

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement


US Inbound: New APA report

fuller.jpg

forst.jpg

Jim Fuller


David Forst

The IRS issued its annual advance pricing agreement (APA) report covering calendar year 2012. Interestingly, 75% of the APAs were inbound, that is, they involved foreign parent companies and US subsidiaries. The majority of all bilateral APAs were with Japan. There was a substantial increase in the number of APAs executed during 2012, which is a good sign. It likely was due to the Advance Pricing and Mutual Agreement (APMA) office's restructuring and, likely more significantly, to the substantial increase in the APA staff. This suggests the APMA folks are digging into their backlog, which is substantial.

However, processing time to get an APA in 2012 increased over 2011. While the APA report states that processing time actually decreased, this appears not to be the case. The average processing time went up from 40.7 months to 41.7 months and the median processing time went up from 36.5 months to 39.8 months. (Even more troubling, 2011 represented an increase in processing time over 2010.)

The decrease in processing time stated in the APA report summary compares 2011 average processing time to 2012 median processing time, which would appear to be a comparison of statistics that are not comparable.

Worse, the processing time for a new APA increased dramatically from 39.5 months median to 50.6 months median. This significant increase in processing time is not a good sign.

The number of APA requests filed in 2012 is consistent with the five-year average of APAs filed during 2008-2012. There was an increase in APA requests filed over the immediately preceding year, but this comparison would appear to be misleading. Far fewer applications were filed in 2011 than were filed in the three years before.

Fifty-three percent of the bilateral APAs finalised or renewed during 2012 were with Japan. This concentration of bilateral APAs with Japan dwarfs the second and third largest countries in terms of finalised bilateral APAs, which were with Canada, 16% and the UK, 10%. The total for the three countries alone accounted for nearly 80% of all US bilateral APAs during 2012.

A substantial number of the APAs (75%) involved the comparable profits method (CPM) or the transactional net margin method (TNMM). TNMM may have been involved because so many APAs were concluded with Japan. CPM, however, has always played an important role in the US APA process. In 2011, for example, CPM was involved in the great majority of APAs, both those involving tangible and intangible property and those involving services.

Jim Fuller (jpfuller@fenwick.com)

Tel: +1 650 335 7205

David Forst (dforst@fenwick.com)

Tel: +1 650 335 7274

Fenwick & West

Website: www.fenwick.com

more across site & shared bottom lb ros

More from across our site

Ex-EY and Hourani & Partners leader Zain Satardien is using flexible staffing and AI-enabled systems to test a leaner model for specialist tax advice
The big four firm is rightfully prioritising transparency and accountability as it seeks to rebuild from its scandal, but a glaring structural issue remains
A recent hiring flurry has taken the firm’s number of partner appointments this year to 121 and put it on track to hit 160 partner target early
The move brings specialist tax and litigation capability to EY as it seeks to close the gap on Baker McKenzie and Venezuela’s leading local firms
The industry’s response to AI requires an unfamiliar ingredient as firms battle to shape their futures
The ambitious big four challenger firm has also appointed ex-RSM partner Brad Ashton to build out its customs and global trade practice
The big four firm allegedly reviewed backdated documents and signed off on accounts that removed hundreds of millions of dollars of Abramovich’s assets
New Tier 1 entrants and an expanding cohort of established players indicate that law firms are becoming increasingly credible challengers in Europe's TP market
Awards
Leading firms and individuals gathered in Dubai to celebrate standout legal, dealmaking and tax work across the region
Tax authorities want more revenue, have better tools to find it and are increasingly willing to fight for it
Gift this article