Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

February 16, 2021
2021-5193

US IRS's Advance Pricing and Mutual Agreement Program continues case closures despite COVID restrictions

The United States (US) Internal Revenue Service’s (IRS) program to resolve transfer pricing disputes (Advance Pricing and Mutual Agreement Program (APMA)) has adapted well to the virtual environment resulting from the COVID-19 pandemic, according to an article in Tax Notes Today.1

Speaking at a Tax Council Policy Institute conference, Douglas O'Donnell, Commissioner of the IRS Large Business and International Division, said case closures have been "surprisingly robust" despite the fact the work has become completely virtual.

In May 2020, the IRS announced modifications for filing advance pricing agreement (APA) and mutual agreement procedure (MAP) requests to allow for electronic filing and digital signatures. In the same announcement, the IRS also addressed questions about how the current economic environment affects the handling of pending and executed APAs by the APMA (see EY Global Tax Alert, US IRS announces modifications for filing APA and MAP requests, addresses questions on pending and executed APAs, dated 15 May 2020).

O'Donnell said "the pandemic has brought various tax administrations around the world closer together," adding "this alignment of interests in enforcement and compliance was clearest when addressing large multinational entities and high-wealth individuals with cross-border activities," according to the article.

In addition, O'Donnell noted the work being done by the Joint International Taskforce on Shared Intelligence and Collaboration, which keeps track of global trends and enables collaboration and sharing of resources and expertise, and the International Compliance Assurance Program (ICAP), which focuses on transfer pricing and permanent establishment issues. O'Donnell said the IRS is trying to expand the number of countries participating in ICAP and include jurisdictions in Asia, Africa and South America.

According to the article, O'Donnell said "[t]he idea is to get to a place where we view the taxpayers' transactions across the board as low risk and are able to issue them a letter that says the same." While some taxpayers worry that the letter is nonbinding, O'Donnell noted, it is still "a clear statement of intent on the part of the tax administrators that we are not going to do additional work on a particular issue."

Implications

Consistent with O'Donnell's remarks, EY's National Tax Department transfer pricing practice has observed an increase in MAP and APA case completions due to APMA's technological modifications and increased collaboration amongst taxing authorities. APAs and MAPs are critical tax dispute resolution tools for taxpayers to consider as tax controversies will likely increase due to tax authorities' responses to the global pandemic.

Endnotes

  1. Andrew Velarde, Virtual Environment a Boon to IRS Mutual Agreement Work, Tax Notes Today (12 February 2021).

________________________________________________

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), International Tax and Transaction Services – Transfer Pricing Controversy, Washington, DC

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct