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Advanced Pricing Agreement (“APA”) Application

For some taxpayers, obtaining an APA may provide an effective solution to transfer pricing audit risk Our transfer pricing professionals can facilitate and provide support throughout the APA process:

APA Background

Under an APA, the tax authority agrees to not adjust or audit the pricing of specified transactions under an agreed to transfer pricing method for a fixed period (typically from 3 to 5 years). For some taxpayers, obtaining an APA may provide an effective solution to transfer pricing audit risk. APA applications have increased steadily in Japan. 113 bilateral APA applications were submitted in 2007, more than double the number submitted in 2002.

From 2008 onwards, APA applications must be submitted before the start of the fiscal year to which the APA is to apply. Several informal pre-consultation meetings with NTA examiners are typically required before an application will be formally accepted. According to NTA reports, bilateral APA applications have an average processing time of between 2 and 3 years. Obtaining a multilateral APA takes significantly longer. The filing of an APA application by the taxpayer does not stop a transfer pricing audit if already underway.

APA Services

An APA is a solution for taxpayers seeking maximum certainty with respect to transfer pricing for the upcoming fiscal years. Our transfer pricing professionals can facilitate and provide support throughout the APA process:

  • Initial planning
  • Establish the transfer pricing position for the APA
  • Preparation of the application package
  • Support at pre-filing meetings
  • Negotiation with the tax authority
  • Manage communications with APA reviewers
  • Advise and support taxpayer through final settlement of the APA
  • Preparation of annual compliance reports during the APA period
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