The competent authority informs the subject of the outcome of the negotiations. Many states require the taxpayer to approve the agreement before it becomes binding. A pre-price agreement gives the taxpayer certainty as to how the pricing of APA transactions is treated with income tax when the taxpayer acts under the APA. At the same time, the taxpayer can also avoid an international double taxation related to the pricing of these transactions, since all contracting parties to the APA agree to accept the compensation fees in accordance with the APA. An APA can be achieved through the pricing of transactions between parties linked to different countries of residence. All parties applying for aPA must have as a country of residence a state party to a tax treaty. 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.
Following the signing of the pre-price agreement with the State or foreign countries, BZSt informs the applicant in writing of the result and asks him to approve the content of the agreement. In addition, the applicant is asked to waive his right of appeal to the tax office. Once the applicant has agreed to the content and waived his right of appeal, the tax office grants the applicant the corresponding mandatory prior obligation to implement the pre-transfer prices at the national level. The pre-price agreement is between the states and the taxpayer is not a party to the agreement. The competent authorities of the States concerned are the negotiating partners of the APP procedure. The subject may apply to the competent authority for an extension of the APA. The APA is agreed for a fixed period, which means that there is no certainty as to the tax treatment of the transaction in question. It is recommended that the applicant reapply at an early stage in order to extend the APA before the initial APA expires or, at least, as soon as possible.
When evaluating the transactions covered by the original agreement, the renewal of the APA may be faster and simpler than processing the initial APP application. The purpose of the APA is to determine the tax debt between two or more states for a specified period of time. The partners in the advanced transfer pricing procedure are therefore the contracting states concerned. However, the applicant is regularly informed of the status of the procedure and the status of the procedure. The OECD has published guidelines for the APA as part of its transfer pricing guidelines (see OECD guidelines on transfer pricing for multinational companies and tax administrations, 2010, Chapter IV, Section F and Chapter IV annex). In accordance with OECD transfer pricing guidelines, APA negotiations are based on Article 25 of the OECD Model Tax Convention. The APA is not binding on the Finnish tax administration if the actual conditions do not comply with what was set out in the application. The subject should apply for a review of the APA as soon as circumstances change. The pre-price agreement is always the initiative of the taxpayer.
The APP procedure begins with the written request of the subject to the competent authority.