What are Advance Pricing Agreements (APAs)?
Advance pricing agreements (APAs) are instruments that allow companies and the tax administration to agree in advance on the methodology for determining the transfer prices applicable to transactions between related parties. In Germany, APAs aim to provide legal certainty and prevent tax disputes.
New guidance issued in Germany
The German government has issued new guidelines for its APA program, providing greater clarity on procedures and documentation requirements. These guidelines seek to align local practices with international standards, such as those set by the OECD.
Key aspects of the new guidelines
- Duration of the agreement: PPAs will have an initial term of up to five years, with the possibility of renewal if circumstances do not change.
- Documentary requirements: Companies must provide detailed information on transactions, Transfer Pricing methods and comparable data.
- Bilateral or multilateral approach: Although unilateral APAs are possible, collaboration with the tax authorities of other countries involved is encouraged.
Benefits for companies
Implementing an APA can avoid conflicts with the tax administration and reduce costs arising from audits or litigation. It also allows companies to operate with greater predictability in a complex tax environment.
How can TPC Group help?
At TPC Group we are specialists in Transfer Pricing.
Contact us for more information!
Source: Mondaq
