IRS signed fewer APAs in 2016, statistics show

The US IRS today released its annual statistics on the performance of its Advance Pricing Mutual Agreement (APMA) program, revealing that the tax agency signed fewer advance pricing agreements (APAs) with multinationals in 2016 than in recent years.

In Announcement 2017-03, the IRS also released its model APA agreement and said that it was working on revising it. The last major revision to the APA model occurred in 2009, the Service said.

According to the IRS, 86 APAs were executed in 2016. This is down from 110 signed in 2015, 101 in 2014, 145 in 2013, and 140 in 2012.

Of the APAs signed in 2016, 21 were unilateral, 65 were bilateral, and zero were multilateral. A total of 49 APAs were renewals.

The Service said that almost three-quarters of the bilateral APAs signed during the year were with either Japan or Canada.

Most concerned the sale of tangible goods and the provision of services. Transactions involving intangibles were involved in 20 percent the cases completed, the Service said.

Also, consistent with prior years, the primary transfer pricing method used was the comparable profits method/transactional net margin method. This method was used in 89 percent of cases involving the transfer of tangible and intangible property, the Service said.

Median time required to complete an APA in 2016 was 32.8 months, slightly longer than the 31.9 months required in 2015, but an improvement over stats for 2014, which showed that APAs took 35.3 months to complete.

According to the IRS data, applications for new APAs in 2016 totaled 98, significantly fewer than last year’s new applications, but in line with the years before that. In 2011, 2012, 2013, and 2014, applications numbered 96, 126, 111, and 108, respectively. In 2015, applications had surged to 183.

Of the 2016 APA applications, 14 were unilateral APAs, 84 were bilateral APAs, and 0 were multilateral APAs.

Total cases remaining in inventory at the end of 2016 numbered 398, down slightly from last year’s total of 410, but an increase over the 336 cases remaining in inventory in 2014.

The Service said that half of the pending bilateral APAs involved Japan or Canada.