Tax authorities may not always agree with your company’s pricing arrangements and policies, which can lead to audits and adjustments. Economic double taxation may also result where adjustments are made in one country without a corresponding adjustment in the other relevant jurisdiction. Uncertainty related to these issues can make it difficult for your group to manage its effective tax rate and lead to greater tax risk than anticipated.
An APA is a formal agreement between a taxpayer and one or more tax authorities to determine and set transfer prices for transactions between the taxpayer and its related parties. APAs typically run five years or more with the possibility of renewal and rollback.