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US Inbound: New IRS APA report shows significant decrease in APA requests

Jim FullerDavid Forst

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 countries.

There was also a surprising number of withdrawn APAs during 2016: 24. This was the most since 2002 when 26 were withdrawn. In 2015, only 10 APA requests were withdrawn, and in 2014 only one request was withdrawn.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 ( and David Forst (
Fenwick & West

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