APAs remain popular
Multinational enterprises (MNE) deploy different strategies to manage transfer pricing (TP) risks. Besides complying with the arm’s-length principle and documentation requirements, strategies may include (i) aligning TP models with business operations; (ii) fostering a transparent relationship with tax authorities; and (iii) refraining from taking aggressive positions.
While these strategies help to reduce TP risks, they do not eliminate them. Therefore, it is not surprising that the use of APAs by MNEs has been on the rise. In its 2019 TP and International Tax Survey, EY concluded that 37% of the companies surveyed were using an APA to reduce tax risks. Also, more jurisdictions are rolling out APA programmes, making them available worldwide.