Tag: Advance pricing agreement (APA)

An arrangement that determines, in advance of controlled transactions, an appropriate set of criteria (e.g. method, comparables and appropriate adjustments thereto, critical assumptions as to future events) for the determination of the transfer pricing for those transactions over a fixed period of time. An advance pricing arrangement may be unilateral involving one tax administration and a taxpayer or multilateral involving the agreement of two or more tax administrations.

US vs Eaton, Oct. 2019, United States Tax Court, Docket No 5576-12

US vs Eaton, Oct. 2019, United States Tax Court, Docket No 5576-12

Eaton Corporation is a global manufacturer of electrical and industrial products headquartered in the US.  This case concerning the computation of penalties is related to a previous 2017 dispute concerning the cancellation of two advance pricing agreements (APAs) establishing a transfer pricing methodology (TPM) for covered transactions between Eaton Corp and its subsidiaries. In 2011 IRS determined that Eaton had not complied with the applicable terms of the governing APA revenue procedures and canceled APA I and APA II, effective January 1, 2005 and 2006, respectively. The US Tax Court found that the cancellation of the APAs was an abuse of discretion (US vs Eaton TC opinion from July 2017), and the APAs remained in effect. Irespective of the ruling related to the cancellation of the APAs, the IRS determined that a section 482 adjustment were still necessary to reflect an arm’s-length result for Eaton’s intercompany transactions, and that the computations should include 40% penalties pursuant to I.R.C. sec. 6662(h). Section 6662(a) imposes a ... Continue to full case
Spain vs. Zeraim Iberica SA, June 2018, Audiencia Nacional, Case No. ES:AN:2018:2856

Spain vs. Zeraim Iberica SA, June 2018, Audiencia Nacional, Case No. ES:AN:2018:2856

ZERAIM IBERICA SA, a Spanish subsidiary in the Swiss Syngenta Group (that produces seeds and agrochemicals), had first been issued a tax assessment relating to fiscal years 2006 and 2007 and later another assessment for FY 2008 and 2009 related to the arm’s length price of seeds acquired from Zeraim Gedera (Israel) and thus the profitability of the distribution activities in Spain. The company held that new evidence – an advance pricing agreement (APA) between France and Switzerland – demonstrated that the comparability analysis carried out by the Spanish tax authorities suffered from significant deficiencies and resulted in at totally irrational result, intending to allocate a net operating result or net margin of 32.79% in fiscal year 2008 and 30.81% in 2009 to ZERAIM IBERICA SA when the profitability of distribution companies in the sector had average net margins of 1.59%. The tax authorities on there side argued that the best method for pricing the transactions was the Resale Price ... Continue to full case
US vs EATON-CORPORATION, July 2017, US Tax Court, TC memo 2017-147

US vs EATON-CORPORATION, July 2017, US Tax Court, TC memo 2017-147

The IRS decided to cancel two advance pricing agreements (APAs) with Eaton Corporation. The US Tax Court ruled that this decision was an abuse of discretion. US vs EATON CORPORATION AND SUBSIDIARIES, July 26 2017, United States Tax Court, TC memo 2017-147 ... Continue to full case