Advance Pricing Agreements - A Strategic Tool in Global Transfer Pricing Management

Abstract

The article focuses on the Advance Pricing Agreements (APA) programof the U.S. Internal Revenue Service (IRS). The program was createdin March 1991 to prevent transfer pricing contentions by draftinga concession with taxpayers. The benefits of APA is the assuranceof tax treatments including independence from U.S. penalty, adjustmentsand double tax. The five phases of the APA process are also discussedsuch as preparation, administration and renewal. Its objectives,strategies and user fees are presented. The function of the IRS employeesis defined.