The OECD recently published guidance on bilateral advance pricing arrangements ("APAs") which highlights 29 best practices that should be followed by tax authorities in the negotiation of APAs (the "Guidelines"). While the Guidelines do not impose binding rules on tax authorities, it is hoped that they will enhance overall efficiencies in the negotiation of APAs globally by reducing delays and increasing certainty.
Ireland has had a formal APA programme (the "Programme") in operation since 2016, and APAs were entered into by Ireland for many years prior to the introduction of the Programme. Interestingly, many of the best practices detailed in the Guidelines are already reflected in the operation of the Programme.
Background
The Guidelines were developed based on responses received by the OECD to a survey of competent authorities and taxpayers which highlighted the following points:
- taxpayers and competent authorities overwhelmingly support the future use of APAs as a means of providing tax certainty;
- taxpayers view APAs as an effective mechanism to prevent disputes and reduce potential double taxation;
- the APA process was often longer than the tax periods it sought to cover;
- jurisdictional differences at key times unnecessarily increased the length of the APA process;
- the APA process requires a large amount of resources from the taxpayer and the competent authorities involved; and
- there is a lack of transparency at times between all stakeholders on key parts of the APA process.
The Guidelines
The Guidelines seek to provide a common framework for tax authorities to manage the APA process. Many of the best practices noted in the Guidelines which seek to enhance efficiency and transparency are also reflected in the Programme, including the following:
- All jurisdictions should have clear, publically available rules, guidelines and procedures which outline all relevant information relating to the APA process. Detailed guidance on the operation of the Programme is published on Irish Revenue's website which contains all relevant information relating to the APA process in Ireland.
- Jurisdictions should make use of technology and electronic submissions. Irish Revenue use an electronic secure file transfer system for the submission of APA documents.
- Competent authorities should publish timelines for key milestones in the APA process (eg, notification of acceptances, agreement, failure to reach agreement, etc). Irish Revenue include timelines for similar milestones in its published guidance on the Programme.
- Jurisdictions and taxpayers should aim to have an APA signed within 30 months (moving to 24 months when possible) and the term of the APA should be for a minimum of 5 years. Irish Revenue commit to concluding an APA within 24 months of submission where possible. APAs concluded by Ireland are typically valid for up to 5 years.
Key Takeaways
The fact that all relevant parties "overwhelmingly support" the use of APAs has been reflected in Ireland in recent years in the increased resources allocated to, and the increasing case load of, the Irish Competent Authority. The global implementation of the best practices detailed in the Guidelines should ensure that the Programme continues to deliver certainty for Irish resident taxpayers in an efficient manner going forward.