Mayer Brown announced today that Sonal Majmudar, former international tax counsel with the Internal Revenue Service (IRS), joined its Tax practice as a partner. Sonal will be resident in the firm’s Washington DC office. Her arrival bolsters Mayer Brown’s market-leading, global tax offerings, particularly with regard to transfer pricing controversies and high-stakes international disputes.
On April 25, 2023, the IRS’s Advance Pricing and Mutual Agreement (“APMA”) Program issued new interim guidance for its review of taxpayer Advance Pricing Agreement (“APA”) requests. Notably, the guidance introduces an “optional pre-submission review” for taxpayers that wish to submit a prefiling memorandum before submitting a formal APA request. Based on the pre-submission review, APMA will give a preliminary opinion whether it believes that an APA is well-suited to achieve tax certainty for the proposed covered transactions. The new interim guidance also instructs APMA personnel on how to review formal taxpayer APA requests for acceptance to the program, or whether to suggest an “alternative workstream” such as the International Compliance Assurance Program (“ICAP”)[1] or a joint audit.
On February 1, 2023, the OECD Forum on Tax Administration published its Manual on the Handling of Multilateral Mutual Agreement Procedures and Advance Pricing Arrangements. (“Multilateral MAP and APA Manual” or the “Manual”). The Multilateral MAP and APA Manual provides new guidance to both tax administrations and taxpayers on how both multilateral MAPs and APAs can be negotiated and implemented under existing bilateral tax treaties in circumstances where a double tax issue cannot be adequately resolved without involving one or more third jurisdictions. The Multilateral MAP and APA Manual is similar in some ways to the Bilateral Advance Pricing Arrangement Manual (“Bilateral APA Manual”) that the OECD published in September 2022, which was the subject of a prior blog post. However, whereas the Bilateral APA provided specific, detailed, best practices to tax administrations and taxpayers reflecting decades of experience within a well-established process, the Multilateral MAP and APA Manual aims to provide a more basic awareness of how multilateral MAPs and APAs can be negotiated and implemented in appropriate cases.
On September 28, 2022, the OECD published the Bilateral Advance Pricing Arrangement (“BAPA”) Manual. The manual proposes best practices for jurisdictions to streamline, expedite and improve BAPA processes based on member surveys. Most notably, the BAPA manual encourages jurisdictions to conclude BAPAs within 30 months and to work to further reduce completion times to 24 months or less.
Continue Reading Prepare for Warp Speed: New Goal to Conclude APAs is 24–30 Months
On May 27, 2022, the OECD released two public consultation documents related to the tax certainty aspects of Amount A. The first, entitled Pillar One – A Tax Certainty Framework for Amount A (the Amount A Draft), proposes new mechanisms for multinational enterprises (MNEs) to obtain certainty on different aspects of Amount A. The second, entitled Pillar One – Tax certainty for issues related to Amount A (the Related Issues Draft), proposes a mandatory binding dispute resolution mechanism for issues related to Amount A, including transfer pricing and the attribution of profits to permanent establishments (PEs). Given the potential for Amount A to result in uncertainty, disputes and double taxation, these proposed mechanisms will be of critical importance to in-scope and potentially in-scope MNEs. Such MNEs should further note that both the Amount A Draft and the Related Issues Draft provide a short two-week public comment period that closes on June 10, 2022.
On March 22, 2022, the Internal Revenue Service’s Advance Pricing and Mutual Agreement Program (“APMA”) released its 2021 Announcement and Report Concerning Advance Pricing Agreements (“2021 Annual Report”). The 2021 Annual Report shows that multinationals’ demand for advance pricing agreements (“APAs”) is high and increasing, with APMA receiving 145 APA applications in 2021, a 20% increase from 2020. The report similarly shows that APMA made steady progress in concluding APAs during 2021 with 124 completions, with notable highlights including a substantial increase in completions of bilateral APAs with Germany and a decrease in completions of bilateral APAs with India.
Continue Reading APMA’s 2021 APA Annual Report Shows High Demand for APAs by Multinationals and Steady Progress by APMA in Concluding Cases
In ancient Rome, a college of “augurs” would predict the future by observing the flight patterns of birds, examining the entrails of animal sacrifices, or interpreting natural phenomena. While perhaps less colorful, our method of divination will hopefully be a little more precise. To develop this blog post, we have consulted our own augurs and have summarized all our predictions for transfer pricing developments in the coming year.
Continue Reading Looking Forward: Predictions for 2022
On October 13, 2021, the G20 Finance Ministers and Central Bank Governors issued a Communiqué formally endorsing the political agreement reached by 136 countries of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (IF) on a two-pillar framework to dramatically change the taxation of multinational enterprises (MNEs). The Communiqué calls on the IF
On August 13, 2021, the IRS released a Chief Counsel Advice (“CCA”) (CCA 202132009) addressing the tax treatment of intercompany reimbursements of the Branded Prescription Drug (“BPD”) fee, a non-deductible excise tax imposed by the Patient Protection and Affordable Care Act on entities that manufacture or import branded prescription drugs for sale to specified government programs. The CCA concludes that intercompany reimbursements of the BPD fee are not per se excludable from gross income, but rather, the inclusion or exclusion of the reimbursement depends on whether the entity paying the fee was the beneficiary of the payment under the facts and circumstances. For pharmaceutical companies subject to the BPD fee, the CCA stops short of providing certainty that reimbursements of the fee are per se excludable, but nevertheless, offers useful guidance on how the reimbursements might be structured to support exclusion in many cases. Outside of the pharmaceutical industry, companies in other industries that pay and receive intercompany reimbursements of other material non-deductible costs may also find the CCA’s guidance to be instructive by analogy.
Continue Reading IRS CCA Addresses Intercompany Reimbursements of Branded Prescription Drug Fee: Guidance May be Relevant to Taxpayers Across Industries with Material Non-Deductible Expenses
On September 9, 2021, the Treasury Department and the Internal Revenue Service (“IRS”) issued its Priority Guidance Plan for 2021-2022. The Priority Guidance Plan gives the public a sense of what regulations and other guidance the Treasury Department and the IRS might develop over the following 12 months. Among dozens of other pending and potential guidance projects, the Priority Guidance Plan lists the following two new potential section 482 regulations projects:
Continue Reading Priority Guidance Plan Portends New Transfer Pricing Guidance