US advance pricing agreement applications surged in 2018, data shows

By Julie Martin, Editor, MNE Tax

The US IRS today issued its annual report providing statistics on its advance pricing agreement (APA) program. The data reveals a significant increase in the number of in new APA applications filed in 2018 as compared to previous years and a corresponding increase in the APA backlog.

APAs are agreements signed by the IRS and a multinational taxpayer and sometimes one or more other countries to resolve transfer pricing issues ahead of time.

The APA backlog was 458 as of December 31, 2018, as compared to a backlog of 386 APAs one year prior. The IRS attributed the backlog, in part, to the increased number of applications. The IRS said that as of December 31, 2018, of the unresolved bilateral APAs, 31 percent involved Japan and 20 percent involved India.

APAs executed in 2018 totaled 107, the data said, which is somewhat consistent with prior periods. A total of 116 APAs were executed in 2017, 86 in 2016, 110 in 2015, 101 in 2014, 145 in 2013, and 140 in 2012.

Of the 107 APAs executed in 2018, about 40% were new APAs rather than renewals. This was the same for the previous two years.

Median time required to complete an APA in 2018 was 40.2 months, an increase over the 2017 figure of 33.8 months, which, in turn, was an increase over the 2016 figure of 32.8 months. In 2015 it took even less time, 31.9 months. Median time to complete an APA in 2014 was higher, though, at 35.3 months.

Although most of the transactions covered in APAs executed in 2018 involved the sale of tangible goods or the provision of services, over 20% covered the use of intangible property.

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Julie Martin

Founder & Editor at MNE Tax

Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.

Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.

Julie can be reached at [email protected].

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