IRS increases fees on advance pricing agreements

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The Internal Revenue Service said Tuesday that fees multinational business taxpayers pay to request a unilateral or bilateral advance pricing agreement will be increasing.

Advance pricing agreements, or APAs, are agreements that multinational companies strike with the IRS to resolve potential transfer pricing disputes ahead of time. With an agreement on the prospective tax treatment of international commerce between related parties, the taxpayer gets greater certainty about its U.S. tax liability.

The fees for APAs will increase in a two-stage process. For APA requests filed after June 30, 2018, the fees will increase as follows: $86,750 for new APAs; $48,500 for renewal APAs; $42,000 for small case APAs; and $17,750 for amendments to APAs. For APA requests filed after December 31, 2018, the fees will increase to the following amounts: $113,500 for new APAs; $62,000 for renewal APAs; $54,000 for small case APAs; and $23,000 for amendments.

The IRS issued a revenue procedure in 2015 setting the fees for APAs at that time, in the Appendix of Rev. Proc. 2015-41. In all other respects, the IRS said Tuesday, the provisions of the Appendix (specifically, section 3, regarding user fees) remain unchanged.

By law, federal agencies are required to charge a user fee to recover the cost of providing certain services to the public that confer a special benefit to the recipient, the IRS noted. Agencies have to review the fees to determine whether they’re recovering the cost of providing these services. Tuesday’s announcement results from the effort to bring this amount closer to full cost. APA fees were last adjusted in 2015.

The Tax Cuts and Jobs Act that Congress passed in December will be making vast changes in the tax treatment of multinational corporations, including lowering their tax rates to a maximum of 21 percent. The law also encourages U.S.-based multinationals to repatriate their foreign profits and bring them back to the U.S. at a reduced tax rate. The new law is sure to encourage many multinationals to reassess their transfer pricing and other international tax strategies.

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Transfer pricing Corporate taxes International taxes IRS