TPcases

Neither the tax administrations nor the taxpayer are in any way obliged to apply the methodology agreed upon as part of the MAP APA to tax years ending prior to the first year of the MAP APA (often referred to as “rolling back”). Indeed, to do so might be impossible if a different fact pattern then prevailed. However, the methodology to be applied prospectively under the MAP APA may be instructive in determining the treatment of comparable transactions in earlier years. In some cases, the transfer prices may already be under enquiry by one tax administration in accounting periods prior to the MAP APA period and that tax administration and the taxpayer may wish to take the opportunity to use the agreed methodology to resolve the enquiry, or, pursuant to domestic law requirements, the tax administration may choose to make such an adjustment even without the taxpayer’s request or agreement. Element 2.7 of the Action 14 minimum standard states that countries with bilateral APA programmes should provide for the roll-back of APAs (to previous filed tax years not included within the original scope of the APA) in appropriate cases, subject to the applicable time limits (such as domestic law statutes of limitation for assessments) where the relevant facts and circumstances in the earlier tax years are the same and subject to the verification of these facts and circumstances on audit.