US Outbound: IRS Issues APA Statistics for 2016

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US Outbound: IRS Issues APA Statistics for 2016

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Taheri

Sean Foley

Cameron Taheri

On March 27 2017, the Internal Revenue Service (IRS) Advance Pricing and Mutual Agreement (APMA) Programme issued its annual report on advance pricing agreements (APA) statistics for 2016 contained in Announcement 2017-03. The highlights include:

  • The number of executed APAs in 2016 was 86 – compared to 110 in 2015, 101 in 2014, and 145 in 2013;

  • The median completion time for unilateral and bilateral APAs was 32.8 months for new APAs and renewed APAs combined, which is a slight increase from the prior year;

  • APAs with Japan (54%) and Canada (20%) comprised 74% of all bilateral APAs executed in 2016, which is consistent with prior years;

  • APAs with a non-US parent and a US subsidiary comprised 65% of all bilateral APAs executed in 2016, which is consistent with prior years;

  • For those APAs executed in 2016, the comparable profits method/transactional net margin method was used in 89% of APAs involving tangible and intangible property and 76% of APAs involving services;

  • The number of APA requests decreased from 183 in 2015 to 98 requests in 2016, which is more in line with the 108 APA requests made in 2014;

  • The number of APA requests with India was 34% and 31% of APA requests were with Japan;

  • The number of APAs withdrawn was 24 during 2016, compared to 10 in 2015; and

  • The number of executed APAs (86) did not surpass the number of applications filed (98) during 2016.

The authors' impressions of the APA statistics include:

  • APA resolutions are down somewhat while APMA focuses on improving the APA process;

  • APA filings have returned to historic levels after last year's exceptionally high filings fuelled by a new IRS APA revenue procedure and concerns driven by the OECD's BEPS project;

  • An unexplained increase in APAs withdrawn; and

  • Japan continues to account for a significant portion of bilateral APAs executed, filed and inventory, with India filings slightly exceeding Japan filings for the first time.

Sean Foley (sffoley@kpmg.com) and Cameron Taheri (ctaheri@kpmg.com), Washington, D.C.

KPMG LLP

Tel: +1 202 533 5588 and +1 202 533 3384

Website: www.us.kpmg.com

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