APAs involving the competent authority of a treaty partner should be considered within the scope of the mutual agreement procedure under Article 25 of the OECD Model Tax Convention, even though such arrangements are not expressly mentioned there. Paragraph 3 of that Article provides that the competent authorities shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. Although paragraph 50 of the Commentary indicates that the matters covered by this paragraph are difficulties of a general nature concerning a category of taxpayers, it specifically acknowledges that the issues may arise in connection with an individual case. In a number of cases, APAs arise from cases where the application of transfer pricing to a particular category of taxpayer gives rise to doubts and difficulties. Paragraph 3 of Article 25 also indicates that the competent authorities may consult together for the elimination of double taxation in cases not provided for in the Convention. Bilateral APAs should fall within this provision because they have as one of their objectives the avoidance of double taxation. Even though the Convention provides for transfer pricing adjustments, it specifies no particular methodologies or procedures other than the arm’s length principle as set out in Article 9. Thus, it could be considered that APAs are authorised by paragraph 3 of Article 25 because the specific transfer pricing cases subject to an APA are not otherwise provided for in the Convention. The exchange of information provision in Article 26 also could facilitate APAs, as it provides for cooperation between competent authorities in the form of exchanges of information.
TPG2022 Chapter IV paragraph 4.150
Posted on |
By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter IV: Administrative Dispute Resolution | Tag: Advance pricing arrangement (APA), Bilateral APA
« Prev |
Next » Related Guidelines
- TPG2022 Chapter II Annex I paragraph 1[See Chapter II, Part III, Section B of these Guidelines for general guidance on the application of the transactional net margin method. The assumptions about arm’s length arrangements in the following examples are intended for illustrative purposes only and should not be taken as prescribing adjustments and arm’s length arrangements...
- TPG2022 Chapter IV paragraph 4.32To eliminate double taxation in transfer pricing cases, tax administrations may consider requests for corresponding adjustments as described in paragraph 2 of Article 9. A corresponding adjustment, which in practice may be undertaken as part of the mutual agreement procedure, can mitigate or eliminate double taxation in cases where one...
- TPG2022 Chapter VI Annex I example 11. Premiere is the parent company of an MNE group. Company S is a wholly owned subsidiary of Premiere and a member of the Premiere group. Premiere funds R&D and performs ongoing R&D functions in support of its business operations. When its R&D functions result in patentable inventions, it is...
- TPG2022 Chapter IV Annex II paragraph 1Advance Pricing Arrangements (“APAs”) are the subject of extensive discussion in the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations at Chapter IV, Section F. The development of working arrangements between competent authorities is considered at paragraph 4.175: Between those countries that use APAs, greater uniformity in APA practices...
- TPG2022 Chapter IV paragraph 4.153An APA programme can assist taxpayers by eliminating uncertainty through enhancing the predictability of tax treatment in international transactions. Provided the critical assumptions are met, an APA can provide the taxpayers involved with certainty in the tax treatment of the transfer pricing issues covered by the APA for a specified...
- TPG2022 Chapter IV Annex II paragraph 17The fact that a taxpayer may be under audit or examination should not prevent the taxpayer from requesting a MAP APA in respect of prospective transactions. The audit or examination and the mutual agreement procedure are separate processes and generally can be resolved separately. Audit or examination activities would not...
- TPG2022 Chapter IV paragraph 4.34Under paragraph 2 of Article 9, a corresponding adjustment may be made by a Contracting State either by recalculating the profits subject to tax for the associated enterprise in that country using the relevant revised price or by letting the calculation stand and giving the associated enterprise relief against its...
- TPG2022 Chapter IV Annex II paragraph 2This annex follows up on the above recommendations. The objective is to improve the consistency of application of APAs by providing guidance to tax administrations on how to conduct mutual agreement procedures involving APAs. Although the focus of the annex is on the role of tax administrations, the opportunity is...
- TPG2022 Chapter IV paragraph 4.31Paragraph 5 of Article 25, which was incorporated in the OECD Model Tax Convention in 2008, provides that, in mutual agreement procedure cases in which the competent authorities are unable to reach an agreement within two years of the initiation of the case under paragraph 1 of Article 25, the...
- TPG2022 Chapter IV Annex II paragraph 8The focus of this annex is on providing guidance to enable tax authorities to resolve disputes through the mutual agreement procedure, thereby helping to eliminate the risk of potential double taxation and providing the taxpayer with reasonable certainty of tax treatment. However, it should be noted that there are other...