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October 5, 2022

OECD publishes Manual on Bilateral APAs

  • The Organisation for Economic Co-operation and Development (OECD) published its Bilateral Advance Pricing Arrangement Manual on 28 September 2022.

  • The Manual is intended to provide an effective guide on Bilateral Advance Pricing Agreements (BAPAs) for both tax administrations and taxpayers, setting out the objectives of BAPAs and obstacles currently faced, 29 Best Practices for engaging in BAPAs and providing practical resources (sample BAPA timelines, template agreements, etc.). This Alert summarizes the 29 Best Practices.

  • The Best Practices for BAPAs identified in the Manual are a positive step forward in providing a framework for coordinating and streamlining the BAPA processes around the world without imposing a set of binding rules, which should help to increase the efficiency and efficacy of this dispute prevention tool.

Executive summary

On 28 September 2022, the OECD published its Bilateral Advance Pricing Arrangement Manual (the Manual) as part of the ongoing tax certainty work of the OECD’s Forum on Tax Administration. The Manual was approved by the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and all members of the OECD Forum on Tax Administration.

Bilateral Advance Pricing Agreements (BAPAs) are an effective tool for providing tax certainty and preventing cross-border tax disputes, however obstacles and misalignment can persist which mean that BAPAs are currently underutilized.

The Manual is intended to provide an effective guide on BAPAs for both tax administrations and taxpayers, setting out the objectives of BAPAs and obstacles currently faced, 29 Best Practices for engaging in BAPAs and providing practical resources (sample BAPA timelines, template agreements, etc.). The Best Practices do not impose a set of binding rules upon jurisdictions, nor provide or mandate a single and uniform BAPA process for all jurisdictions. Rather, they seek to:

  1. Increase transparency and collaboration between competent authorities and taxpayers

  1. Ensure symmetries in requested information between competent authorities

  1. Mitigate delays created by differences in individual jurisdiction’s BAPA processes

  1. Ensure realistic expectations as to the resources requirements and expected timeframes

This Alert provides an overview of the Manual and highlights key aspects. A summary of the 29 Best Practices is included in the Table at the end of this Alert.

Detailed discussion


BAPAs and multilateral APAs provide advance tax certainty to taxpayers and tax administrations, helping to prevent cross-border tax disputes and reduce the risk of double taxation. An efficient and effective process for undertaking BAPAs is vital to ensuring these benefits are maximized. In developing the Manual, survey input was gathered from both tax administrations and taxpayers to understand the functioning of BAPA programs across jurisdictions, obstacles and improvements.

The outcome of the survey provided overwhelming support for the use of BAPAs as a tool to provide advance tax certainty, achieving fairer tax outcomes than audits and the Mutual Agreement Procedure (MAP), and providing more collaborative engagements. However, it was recognized that the attractiveness and effectiveness of BAPAs can be undermined by the length of the process, the amount of resources required and a lack of a consistent framework and transparency.

The newly published Manual describes these key findings of the survey responses provided by competent authorities and taxpayers and outlines the need for streamlining of the BAPA process. Taking into consideration comments received from taxpayers and competent authorities, the Manual seeks to provide guidance and a common framework for undertaking BAPAs by outlining 29 Best Practices in three areas:

  1. Best Practices in relation to effective BAPA processes fundamentals

  1. Best Practices in relation to effective BAPA procedures

  1. Best Practices in relation to other issues raised in relation to BAPAs

The Best Practices contained in the Manual are ways and conducts that are considered to be the most appropriate manner to deal with a BAPA process or procedural issues, based on input during the consultation process from tax administrations and taxpayers across a number of jurisdictions.

None of the Best Practices have priority over another and none of them extend, restrict or modify the legal rights of either the taxpayers or jurisdictions. Although taxpayers and tax administrations should ideally strive towards implementing the Best Practices, the Manual recognizes flexibility should be allowed for in applying them. In contrast to the Best Practices under the BEPS Action 14 minimum standard, the implementation of Best Practices contained in this Manual by jurisdictions is not expected to be documented in a report.

I. Best Practices in relation to effective BAPA processes fundamentals [Best Practices 1-10]

The Manual outlines seven areas for development that are considered fundamental to ensuring an efficient and effective BAPA program. These areas are:

  • Fostering a collaborative and cooperative BAPA process [Best Practices 1-2]

  • Providing clear guidance on the BAPA process [Best Practice 3]

  • Embracing technology and increased communication and transparency to improve efficiency [Best Practice 4]

  • Creating realistic expectations as to the probable length of the BAPA process [Best Practice 5]

  • Ensuring BAPAs are prospective [Best Practice 6]

  • Ensuring adequate resourcing in relation to BAPAs [Best Practice 7]

  • Increased communication and transparency [Best Practices 8-10]

The time taken to reach agreement on a BAPA is currently considered a fundamental impediment to the greater use of BAPAs. Significant delays can be caused by a variety of factors, for example divergences in jurisdictions’ BAPA processes, complexity of cases and strain on resources. The Manual aims to address this through encouraging greater transparency, communication, and alignment of different jurisdictions’ BAPA processes.

In particular, the first set of Best Practices includes clear guidance on the BAPA process and introduces the aim to reach agreement on new BAPA applications within 30 months. This timeline is reduced to 24 months once jurisdictions have taken sufficient efforts to streamline and optimize their BAPA processes and resources in line with the Manual. A sample BAPA timeline is included in Annex B as follows:

  • Application review and acceptance: month 1

  • Information gathering: months 2-8

  • Development of position papers: months 8-14

  • Competent authority discussions: months 14-26

  • Finalization and implementation: months 26-30

The Manual specifically stipulates that roll-backs and renewals should be possible (see Section III below) but that it is expected that renewals should take less than 24 months due to the ability to leverage previous analysis undertaken.

It also stipulates that the BAPA term should generally be a minimum of five years and that where appropriate, critical assumptions can be used to balance the risk of future changes to the facts and underlying economic circumstances, rather than unnecessarily restricting the duration of a BAPA. Annex D of the Manual contains a list of potential critical assumptions.

II. Best Practices in relation to effective BAPA procedures [Best Practices 11-27]

The Manual outlines six stages of a typical BAPA process to bridge domestic differences that can increase the length of the BAPA process. The six stages are:

  • Early engagement and pre-filing [Best Practices 11-12]

  • Formal application and BAPA acceptance [Best Practices 13-16]

  • Post BAPA acceptance and information gathering [Best Practices 17-21]

  • Position paper and competent authority discussion [Best Practices 22-25]

  • Finalization and implementation [Best Practices 26-27]

  • Ongoing monitoring

The practices of competent authorities in different jurisdictions can vary greatly in relation to early engagement stages of the BAPA process, prior to formally filing a BAPA application. On balance, the Manual reflects the view that some form of early engagement should be considered best practice, subject to there being sufficient flexibility, and that competent authorities should not be receiving requests for acceptance into a BAPA process without the prior opportunity (whether taken or not) to engage with the taxpayer.

The format and contents of the subsequent BAPA application also varies by jurisdiction. While a harmonized approach to BAPA applications may be difficult, the Manual stipulates that information about the BAPA application process and the contents of a BAPA application should be provided in the published BAPA guidance of a jurisdiction. In addition, the Manual notes the importance of early collaboration between treaty partners, to not only streamline the BAPA process through ensuring steps are aligned but also to ensure the efficient and adequate use of each competent authority’s resources.

In addition, the Manual notes that the level of coordination between competent authorities throughout the BAPA process varies significantly. The second set of Best Practices sets forth the importance of agreeing to a high-level project plan, only requesting targeted information, taxpayers providing the same information to both competent authorities simultaneously and having a common understanding of the facts prior to commencing discussions. These Best Practices encourage transparency and make it clear that any disagreement in relation to the delineation of the covered transaction(s) and the underlying facts should be considered as part of the information gathering stage before competent authorities commence discussions.

To achieve timely resolution and to facilitate meaningful discussions, the Manual considers the preparation and transmission of a position paper between competent authorities as a matter of priority, since they allow the competent authorities to understand each other’s position prior to discussions commencing. The Manual also seeks to set boundaries, for example noting that taxpayers should not have a role in the preparation of position papers and should not be part of this discussion process. Once in-principle terms have been agreed, the competent authorities should expedite the drafting of the BAPA. Annex C of the Manual includes a short-form position paper for less-complex BAPA applications, Annex E includes a sample position matrix and a sample BAPA is found in Annex F.

Finally, the Manual notes that ongoing BAPA compliance requirements for the taxpayer differ from case to case. While no Best Practice is included as such, the Manual notes that taxpayers and tax administrations should agree on the types of documents and records that the taxpayer must maintain and retain for the purposes of verifying the taxpayer’s compliance with the BAPA and that the guidance in Chapters IV and V of the OECD Transfer Pricing Guidelines1 should be followed.

III. Other issues raised in relation to BAPAs [Best Practices 28-29]

The Manual further lists the other aspects of a tax administration’s process or policy that may be relevant to the BAPA process:

  • Interaction of audit with the BAPA process [Best Practice 28]

  • Retroactive application of BAPAs

  • BAPA renewals [Best Practice 29]

  • Fees as part of the BAPA process

In determining if a BAPA application is accepted into a BAPA program, a relevant consideration may be whether the taxpayer and/or relevant transaction is under audit or at risk of audit. The Manual recommends that jurisdictions ensure that their audit and BAPA functions communicate and coordinate effectively and provide transparency in this respect, as well as with the treaty partner.

Furthermore, the Manual notes that the ability to obtain roll-backs and renewals of BAPAs varies considerably. Given the significant effort of all parties to establish BAPAs and the tax certainty benefits they bring, the Manual encourages roll-backs and renewals where possible and appropriate.


The Best Practices for BAPAs identified in the Manual are a positive step forward in providing a framework for coordinating and streamlining the BAPA processes around the world without imposing a set of binding rules, which should help to increase the efficiency and efficacy of this dispute prevention tool.

In assessing whether implementation of any best practice is appropriate, the Manual makes clear that jurisdictions should consider the circumstances of their own BAPA program and processes, as well as the unique features of each individual BAPA application. Given the importance of certainty and avoiding double taxation, it is important that the Best Practices set forth in the Manual are adopted across jurisdictions where appropriate. This will help foster greater collaboration between tax administrations and taxpayers and create a more efficient tool for tax certainty, which is more important than ever in light of the ongoing work on the BEPS 2.0 project.

EY welcomes the new Manual and its clarity on improving the process for all stakeholders and anticipates that this will lead to improved taxpayer and tax authority certainty on a timely basis through engagement in appropriate BAPAs.

Table 1 – Best Practices summary

I. Best Practices in relation to effective BAPA processes fundamentals


Good faith

Competent authorities (CAs) and taxpayers should engage with one another in a principled, fair, objective and transparent manner, with each BAPA application decided on its own merits. As part of a principled approach to BAPAs, CA and taxpayer positions should be based on analysis conducted in accordance with the applicable bilateral tax treaty, the domestic laws of the relevant jurisdictions and the relevant international transfer pricing guidance. The Manual provides that, while it is inevitable that some element of negotiation will form part of any BAPA, CAs and taxpayers should engage in all parts of the BAPA process to find an answer acceptable to all parties within the framework of the arm’s-length principle rather than the answer that best suits their direct economic interests.


Arm’s-length principle

The Manual provides that taxpayers’ positions in their BAPA applications should be on a principled basis in line with the arm’s-length principle. During the BAPA process, the taxpayer should file its income tax returns for the proposed BAPA years in the relevant jurisdictions based on the position taken in its BAPA application.


Published guidelines

Jurisdictions should have clear published rules, guidelines and procedures, which outline how to access the BAPA process and the relevant steps in the BAPA process. The Manual lists certain aspects that are to be expected in any guidance and recommends to make such guidance publicly available.


Use of technology

Jurisdictions should make greater use of technology throughout the BAPA process, including providing the means for treaty partners and taxpayers to provide information electronically and greater use of teleconferencing/videoconferencing.


Timeline of 30 (24) months to complete BAPA process

Jurisdictions and taxpayers should aim for a BAPA agreement to be signed within 30 months from the receipt of a complete BAPA application (containing sufficient information) by both CAs; reduced to 24 months upon streamlining of BAPA processes and resources in line with the Manual.


Minimum BAPA period of five years

The term of a BAPA should generally be a minimum of five years, including at least two prospective taxation years, where the facts and circumstances are expected to be the same.


Adequate resources

CAs should be adequately resourced to meet the demands of their BAPA programs. BAPA case officers should be provided with adequate training for dealing with BAPA applications.


Good communication between taxpayers and CAs

CAs and taxpayers should be in regular contact with each other during the BAPA process. This is especially relevant, but not limited to, those parts of the procedure in which the taxpayer is not actively involved.


Good communication between CAs

Once an application is accepted into a BAPA program, CAs in each jurisdiction should be in regular contact with one another in relation to the specific case.


Managing CA personnel changes

CAs should ensure that turnover of BAPA case officers is effectively managed, including ensuring that there is an appropriate transition.

II. Best Practices in relation to effective BAPA procedures


Pre-filing taxpayer engagement with CA

Taxpayers should notify both CAs of their potential BAPA application before requesting acceptance into a BAPA program. The Manual lists certain practical aspects on which the CA may engage with the taxpayer to seek to resolve for purposes of the taxpayer’s BAPA application.


Conduct of CAs during early engagement

During any early engagement stages of the BAPA process, CAs should not:

  • Unduly influence the taxpayer’s position on any issue that forms part of its BAPA application

  • Undertake analysis for the purposes of determining the CA’s position on any issue associated with the BAPA

  • Engage with the taxpayer to unilaterally agree on any position for the purposes of the taxpayer’s BAPA application


Simultaneous filing of BAPA applications

Taxpayers should submit BAPA applications simultaneously to both CAs and both BAPA applications should contain the same information.


Language requirements

Where CAs do not share a common language, BAPA applications (and attached materials) should be filed by the taxpayer with an attached English translation (or a different language if agreed by both CAs), unless the Cas agree that it is not required. Further, CAs should agree with the taxpayer as to the language of conduct of the entire BAPA process, including that applicable to the information provided by the taxpayer.


Notification of treaty partner upon receipt of BAPA application

A CA should, upon receiving a BAPA application, notify the treaty partner of the receipt of such BAPA application and engage with its treaty partner to outline the potential parameters, discuss any immediate issues and additional information that may be required by either CA and outline any domestic limitations that may affect the BAPA process.


Acceptance decision timeline – 30 days

Jurisdictions should aim to make a decision in relation to a BAPA application for acceptance into the BAPA program within 30 days of receipt of a complete BAPA application or, where not possible, the CA should inform the taxpayer and the treaty partner of the expected decision date.


Project plan

Upon acceptance of an application into the BAPA program, both CAs and the taxpayer(s) should agree on a project plan outlining the timelines for each stage of the process from commencement to finalization. Taxpayers and CAs should commit to providing resources required to meet the agreed timeline.


Coordination of information gathering

CAs should coordinate the information gathering process to limit duplication. Where practical, functional interviews and site-visits (if necessary) should be conducted jointly. When functional interviews are conducted, if a set of minutes is recorded, those minutes should be provided to the treaty partner and the taxpayer.


Provision of information to both CAs

Taxpayers should provide any requested information to both CAs simultaneously and as soon as possible, regardless of whether an individual CA has requested the information.


Targeted information requests

CAs should only request information from the taxpayer that is necessary and relevant to informing a CA’s position on a BAPA-related issue.


Ensure common understanding of the facts before discussion stage

If, during the information gathering stage, a CA materially disagrees with the delineation of the covered transaction(s) outlined in the taxpayer’s BAPA application, that CA should share its view with the treaty partner as soon as possible. The Manual provides that CAs may disagree on the facts underlying a BAPA application but should aim to ensure that any such material differences in CAs’ opinions as to the facts are known and discussed, ideally prior to the comparability/benchmarking analysis.


Provision of position papers

At the time a meeting date is set, CAs should agree when position papers should be issued so that all CAs have enough time to evaluate a position paper before discussions take place. Position papers and CA discussions should proceed on the latest financial information available.


No taxpayer access to position papers and discussions

CAs and BAPA case officers should not give taxpayers access to position papers and taxpayers should not be part of the substantive discussions on the BAPA between CAs.


Collaboration during CAs’ discussions

During CA discussions, a CA raising an issue should, as part of noting the issue, where possible, provide its treaty partner with a recommendation as to how to resolve the issue.


Drafting the BAPA

CAs should agree as to which CA will draft the text of the BAPA.


Finalizing the BAPA

CAs and taxpayers should complete finalization and implementation of a BAPA as soon as possible.


Domestic implementation of BAPAs

The terms of any domestic agreement implementing a BAPA entered into by a CA and the taxpayer should be similar to those in the BAPA, subject to domestic law requirements.

III. Best Practices in relation to other issues raised in relation to BAPAs


Interactions between BAPAs and audits

Jurisdictions should ensure they have in place adequate policies/practices to ensure that its audit and BAPA functions communicate and coordinate effectively. Jurisdictions should also include an explanation of the relationship between the audit and BAPA process in their published BAPA guidance (Best Practice 3). Subject to domestic limitations, a CA involved in the BAPA process should ensure that they inform the treaty partner of potential audit interactions, such as ongoing or planned audits in relation to a transaction(s) covered by the BAPA or the planned presence of auditors in BAPA discussions (including auditors on the BAPA team).


Renewal of BAPAs

Where requested by the taxpayer and appropriate, the renewal of a BAPA should be considered in the final year of a BAPA as a matter of general practice where the relevant facts and circumstances are expected to be the same as those during the BAPA period. The Manual provides that, generally, a renewal process where the facts and circumstances are unchanged should be limited to verifying there have been no material changes to:

  • The facts and circumstances in connection with the transaction(s) since the BAPA application was agreed, including the broader business model

  • The relevant economic conditions since the BAPA application was agreed (i.e., movements in business environment)

  • The application of the relevant domestic laws of the jurisdictions covering the transaction(s), including any relevant international guidance


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

Ernst & Young Belastingadviseurs LLP, Rotterdam

Ernst & Young Solutions LLP, Singapore

Ernst & Young LLP (United Kingdom), London

Ernst & Young LLP (United States), New York

Ernst & Young LLP (United States), Washington, DC



  1. Chapter IV (Administrative approaches to avoiding and resolving transfer pricing disputes); Chapter V (Documentation).

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