A pre-price agreement (APA) is a prior agreement between a tax payer and a tax authority on an appropriate transfer pricing method (TPM) for a number of transactions involved during a specified period (“covered transactions”). Under German law, a pre-price agreement (APA) is a combination of a prior agreement between the federal states on the transfer price between internationally linked companies and an expanded obligation based on it. At the end of the APA, the participating countries determine the method of transfer pricing to be applied for a fixed period in the future between the related companies or certain parts of the companies concerned. This is an administrative procedure based on requirements. Information Sheet on Bilateral or Multilateral Pre-Bilateral Agreements The Advance Pricing Agreement (APA) is an advance tax decision that provides companies with legal certainty about their future transactions between two related companies. The Mutual Agreement Procedure (MAP), which is independent of internal remedies, aims to resolve situations of double taxation or situations in which taxation does not comply with a bilateral tax treaty. Here are the models of applicants` declarations that the applicant must submit to the authorities after the signing of the pre-price agreement. In October 1999, the OECD published an update of the OECD guidelines on clearing prices for multinational companies and tax administrations in 1995 (the so-called “guidelines”). This update takes the form of a new schedule to the guidelines, which contains guidelines for the implementation of ex ante price agreements as part of the Mutual Agreement Procedure (MAP-APAs).
The annex is an integral part of the guidelines, as evidenced by the OECD Council`s decision of 28 October to amend its original recommendation on the 1995 guidelines to include the new guidelines in this annex. It therefore has the same status as the eight existing chapters of the guidelines. Bilateral and multilateral APAs are generally bilateral or multilateral, i.e. they also enter into agreements between the subject and one or more foreign tax administrations under the control of the Mutual Agreement Procedure (POP) under the tax treaties.  The subject benefits from such agreements, since he is assured that income from covered transactions is not subject to double taxation on the part of the IRS and the relevant foreign tax authorities. The IRS policy is to “encourage” taxpayers to apply for bilateral or multilateral APA where there are provisions of the competent authority. Upon receipt of the application, the BZSt verifies that all conditions (including the applicant`s agreement not to challenge the fees) for the execution of an APP procedure are met. An APP procedure is only implemented if the application is admissible and justified.
Pre-pricing (APA) is a tax decision that gives companies legal certainty for their future intragroup transactions. However, it is possible that a subject may be able to negotiate a unilateral APA involving only the taxpayer and the IRS. In this case, both parties negotiate an appropriate TPM only for U.S. tax purposes. If the taxpayer is involved in a dispute with a foreign tax authority over the registered transactions, he can apply for a discharge by asking the competent US authority to initiate a procedure of mutual agreement. This, of course, implies the entry into force of an applicable foreign income tax agreement. AAAs – in the aforementioned sense – find their legal basis in the Double Taxation Conventions (DBA), in the respective articles on mutual agreement procedures.