Tax Administration: IRS' Advance Pricing Agreement Program

摘要

Any company that has a related company with which it transacts business needs toestablish transfer prices for its intercompany transactions. The pricing of intercompany transactions affects the distribution of profits among the related companies and, ultimately, the taxable income of the companies. To help curtail complex, lengthy, multimillion-dollar transfer pricing disputes with business taxpayers, the Internal Revenue Service (IRS) developed an advance pricing agreement (APA) program. Under an APA, IRS and taxpayers agree on the methods to determine the prices that related companies charge each other when transferring goods and services over a specified period. Taxpayers also agree to submit annual reports that demonstrate compliance with the terms of the agreements. APAs can be either unilateral--between only IRS and specific taxpayersor bilateral involving negotiations with tax authorities in countries that have income tax treaties with the United States.