International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

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

US Inbound: New APA report



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 (

Tel: +1 650 335 7205

David Forst (

Tel: +1 650 335 7274

Fenwick & West


more across site & bottom lb ros

More from across our site

The forum heard that VAT professionals are struggling under new pressures to validate transactions and catch fraud, responsibilities that they say should lie with governments.
The working paper suggested a new framework for boosting effective carbon rates and reducing the inconsistency of climate policy.
UAE firm Virtuzone launches ‘TaxGPT’, claiming it is the first AI-powered tax tool, while the Australian police faces claims of a conflict of interest over its PwC audit contract.
The US technology company is defending its past Irish tax arrangements at the CJEU in a final showdown that could have major political repercussions.
ITR’s Indirect Tax Forum heard that Italy’s VAT investigation into Meta has the potential to set new and expensive tax principles that would likely be adopted around the world
Police are now investigating the leak of confidential tax information by a former PwC partner at the request of the Australian government.
A VAT policy officer at the European Commission told the forum that the initial deadline set for EU convergence of domestic digital VAT reporting is likely to be extended.
The UK government shows little sign of cutting corporate tax, while a growing number of businesses report a decline in investment as a result of the higher tax burden.
Mariana Morais Teixeira of Morais Leitão overviews Portugal’s new tax incentive regime designed to boost the country’s capital-depleted private sector.
Septian Fachrizal, TP analyst at the Directorate General of Taxes, outlines how Indonesia is relying heavily on the successful implementation of pillar one.