Efficiencies and Benefits of an APA
Deloitte Tax LLP
If you haven’t looked into applying for an Advance Pricing Agreement (APA) recently, you’ll be pleasantly surprised to find that the APA application process is faster than ever: The current Internal Revenue Service goal is only nine months for a U.S. position paper in a bilateral APA, with a closed bilateral agreement expected in about 18 months.
In addition, the cost of seeking an APA, while paid up front, is nevertheless comparable to the cost of a documentation study and updates for the same five-year period. Cash flow is enhanced during that period because you don’t need to maintain large reserves for transfer pricing exposure. You can also count on saving money each year that might otherwise be spent defending an audit or creating new documentation to respond to queries or disputes.
These efficiencies have made it economical for smaller companies to consider an APA. Even if your company conducts cross-border transactions of less than $100 million, it still makes sense to explore APA benefits.