|Jim Fuller||David Forst|
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 (firstname.lastname@example.org)
Tel: +1 650 335 7205
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