A pre-price agreement (APA) is a prior agreement between a tax payer and a tax authority on an appropriate transfer pricing method (TPM) for a number of transactions involved during a specified period (“covered transactions”). Upon receipt of the application, the BZSt verifies that all conditions (including the applicant`s agreement not to challenge the fees) for the execution of an APP procedure are met. An APP procedure is only implemented if the application is admissible and justified. Download our transfer pricing brochure for more details. An APA can be an effective measure to reduce transfer pricing risks for many tax payers, ensuring that the level of future profitability is accepted as appropriate by the tax authorities. The operation of the APA may depend on compliance with certain requirements and compliance with certain critical assumptions. If you have done so, we will be administratively bound by the provisions of the APA and we will not collect additional income tax on the basis of prices developed by the APA for covered cross-border transactions. Under German law, a pre-price agreement (APA) is a combination of a prior agreement between the federal states on the transfer price between internationally linked companies and an expanded obligation based on it. At the end of the APA, the participating countries determine the method of transfer pricing to be applied for a fixed period in the future between the related companies or certain parts of the companies concerned. This is an administrative procedure based on requirements. Jurisdiction of the BZSt with respect to mutual agreement, arbitration and APAs Proceedings You will find here the models of the applicants` declarations that the applicant must submit to the authorities after the signing of the pre-price agreement.
A fact sheet on bilateral or multilateral agreements prior to the issueS Companies wishing to avoid the threat of double economic taxation in advance may apply for the APA. In Germany, the Bundeszentralamt for Steuern (BZSt) is responsible for the implementation of these procedures. Applications to open an APA can therefore be filed directly with the BZSt. An APA is a contract, usually several years, between a tax payer and at least one tax authority, which indicates the pricing method that the taxpayer will apply to transactions with related companies. These programs are designed to help policyholders proactively and cooperatively resolve voluntary or potential transfer pricing disputes as an alternative to the traditional verification process. The double taxation agreement is available on the website of the Federal Ministry of Finance. In its application, the applicant determines the content of the APA. The application must define the scope of both time and substance.
In addition, it is worth mentioning the other countries with which a pre-agreement on transfer pricing is to be concluded. If an applicant requests a multilateral APA (with more than two participating states), the APA consists of several bilateral APAs. AAAs – in the aforementioned sense – find their legal basis in the Double Taxation Conventions (DBA), in the respective articles on mutual agreement procedures. Germany has concluded DBA with more than 90 countries in the world. Most of these DBAs follow the OECD`s draft international agreement. The provisions on mutual agreement procedures are set out in Article 25, paragraphs 1 to 3, of the OECD Model Convention. One of the contentious issues with respect to the taxation of MNCs is the area of intra-company transactions. The pricing of goods and services between two related companies is called transfer pricing.