As part of its Transfer Pricing Guidelines, the OECD has published guidelines on abs procedure (see OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, 2010, Chapter IV, Section F and Annex to Chapter IV). In accordance with the OECD Transfer Pricing Guidelines, ABS negotiations are based on Article 25 of the OECD Model Agreement. An advance pricing agreement (APA) is a procedural agreement between one or more taxable persons and one or more tax authorities, which aims to avoid transfer pricing disputes by defining in advance a number of criteria applicable to certain cross-border transactions controlled within a specified period of time, in order to ensure that they comply with the at-its-view principle. The meeting may be more productive if, prior to the meeting, the taxable person is referred by the competent authority to the transfer pricing issue that he intends to include in the application, the intended scope of the ABS and any other relevant issues necessary to resolve the case. It is desirable that the taxable person also contact the competent authorities of the other States Parties which may be admitted to the APA to clarify the conditions of the APA. Under German law, an advance pricing agreement (APA) is the combination of a prior agreement between countries on transfer pricing between internationally related companies and a pre-award based on it. When concluding APAs, participating countries shall define the transfer pricing method to be applied between undertakings or related parties for a specified period. This is an administrative procedure based on applications. The competent authorities do not always reach an agreement.
In accordance with the articles on mutual agreement procedure contained in tax treaties between Finland and other countries, the competent authorities can only seek agreement on this matter. If the competent authorities do not reach an agreement, the competent authority shall also inform the taxable person accordingly. The taxpayer`s request must provide all the information necessary to resolve the case. The content of the necessary information varies from case to case. Information on the content of the information can be found in the EU Recommendations and the OECD Transfer Pricing Guidelines. In the application, the taxable person must describe, as the method chosen for transfer pricing, that future transactions are valued in a manner consistent with the market. An Advance Pricing Agreement (APA) is an agreement between tax authorities and taxpayers on the future application of the transfer pricing policy. For many taxable persons, an APA can be an effective measure to reduce transfer pricing risks by ensuring that the level of future profitability is accepted as reasonable by tax authorities.
A prior clearing agreement gives the taxable person a prior guarantee as to how the pricing of transactions under the APA is treated under income tax where the taxable person acts in accordance with the APA. At the same time, the taxable person may also avoid international double taxation related to the pricing of such transactions, with all States Parties to the APA committing to accept transfer pricing in accordance with the APA. Here you will find the sample applicants` declarations that the applicant must submit to the authorities after signing the advance settlement agreement….