On March 22, 2022, the US’ Internal Revenue Service issued a report on the country’s advance pricing agreement (APA) regime.
In 2021, the percentage of renewals executed increased (63 percent of all APAs executed in 2021 versus 59 percent in 2020). The number of pending requests increased slightly relative to December 31, 2020. As of December 31, 2021, almost half of the pending bilateral APA requests involved either Japan or India.
Most of the transactions covered in APAs executed in 2021 involve the sale of tangible goods or the provision of services. Fifteen percent of the transactions involve the use of intangible property, which can be among the most challenging transactions in APMA’s inventory. In the majority of APAs, the covered transactions involve numerous business functions and risks.
In 2021, the most commonly used transfer pricing method (TPM) for both the sale of tangible property and the use of intangible property continued to be the comparable profits method/transactional net margin method.