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”). During the implementation review phase, the FTT will assess whether the proposed pricing method and other assumptions and circumstances necessary for the conclusion of a given APA are appropriate; particularly if the APA contributes to the elimination of double taxation and if there is a risk that the taxpayer will receive an “undue tax benefit.” 1% of the value of the transaction that is the subject of the agreement. However, in the case of: an APA is a contract, usually for several years, between a tax payer and at least one tax authority, which defines the method of prices that the taxpayer will apply to his 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. An APA offers other benefits to a company. It provides greater security in the transfer pricing method, reduces the possibility of litigation and facilitates financial reporting on potential tax liabilities. It is important that the APA also reduce the impact of double taxation and the costs of defending reviews and preparing documentation. Taxpayers work in an increasingly regulated business environment, where transparency is essential. Taxpayers need a certain degree of security in managing their tax and potential exposure to risk. Pre-price agreements (APAs) help provide this security to taxpayers. Technically, the bilateral APP procedure is initiated by submitting a formal application in the prescribed form, accompanied by all the necessary documents.
The MoF has compiled a recommended list of necessary documents that taxpayers must provide. In addition to general information on the group`s companies, controlled transactions and financial performance, the documents to be provided must contain information on the results of the application of the proposed pricing method, taking as an example the last three years for which factual information is available. On 17 March 2017, the Russian Ministry of Finance (MoF) issued a draft decision on the procedure for concluding bilateral pre-price agreements (AAA) with authorized agencies of foreign states. This draft regulation fills a legal gap in Russian management of transfer pricing rules and contractual obligations with foreign states. Although the conclusion of APA in the Russian tax code (notably by Article 105.20, point 2, of the Russian tax code) has been general since 2012 for the principals subject, only this proposal for a decision has introduced the procedure for concluding bilateral APA. Overall, this draft contract is a positive step in the evolution of Russian transfer pricing practices. Bilateral APAs are increasingly sought after by taxpayers seeking certainty about their transfer pricing policy, particularly in the current international tax environment. The relevant authorities can then communicate during the negotiation phase. Communication between the relevant authorities can be made either in writing or in person.
If the relevant authorities reach a mutual agreement on a given APA, the agreement is formalized by a written document. Price advance agreement, advance/commitment decision, Czech Republic, Poland, transfer price. The draft decision specifies that taxpayers can request the conclusion of a bilateral APA with respect to transfer pricing with states that have effective double taxation agreements with the Russian Federation. Indeed, the APA can be concluded simultaneously by Russia with one or more competent authorities of foreign states, i.e.