04 November 2016 IRS will follow BEPS Action 5 recommendation by exchanging summaries of unilateral APAs According to an October 31, 2016 article in BNA's Daily Tax Report (210 DTR G-6 (2016)), the IRS has agreed to exchange summaries of unilateral Advance Pricing Agreements (APAs) in accordance with the recommendations under the Organisation for Economic Co-operation and Development's (OECD) Base Erosion and Profit Shifting (BEPS) Action Item 5, Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance. In October 2015, the OECD released its final reports under its BEPS Action Plan, consisting of Actions 1-15. Chapter V of Action Item 5, "Revamp of the work on harmful tax practices: Framework for improving transparency in relation to rulings," lists six categories of "taxpayer-specific rulings which in the absence of compulsory spontaneous exchange of information could give rise to concerns":1 (i) rulings relating to preferential regimes; (ii) unilateral APAs; (iii) cross-border rulings providing for a downward adjustment of taxable profits; (iv) permanent establishment (PE) rulings; (v) related-party conduit rulings; and (vi) any other type of ruling agreed by the Forum on Harmful Tax Practices that gives rise to BEPS concerns. Action Item 5 also recommends that the following countries receive the six categories of taxpayer-specific rulings (described in the previous paragraph):2 1. The countries of residence of all related parties with which the taxpayer enters into a transaction for which a ruling is granted or which gives rise to income from related parties benefiting from a preferential treatment (this rule also applies in a PE context). According to the Daily Tax Report article, the IRS "already agreed to exchange [unilateral APAs] issued on or after April 1, 2016." The article also reported that the IRS has until December 31, 2016, to exchange unilateral APAs issued after January 1, 2010 and still in effect as of January 1, 2014. Although we have not seen the template that the IRS will use for the APA summaries, we assume that it will be similar to the suggested template in Appendix C of the Final Report on Action Item 5, which is attached to this Alert. Because the IRS reportedly has no plans to contact taxpayers about reviewing their particular APA summary information, we recommend that taxpayers contact the IRS as soon as possible to request a copy of their APA summary information so they can express any concerns before that information is exchanged with foreign jurisdictions.
Document ID: 2016-1871 | ||||||||||||||||||||||||||||||||||||||
