What an advance pricing agreement covers
An advance pricing agreement concerns the pricing of a transaction between related entities. Rather than defending that pricing years later in an audit, the company presents the transaction, its functions and risks and the method of setting the price to the tax authority in advance, and the agreement records the accepted approach for the period it covers. The engagement is built around the transaction identified in the application, which keeps the analysis and the benchmarking within a defined scope.
What the work is based on
The starting point is the description of the transaction with the related entity and its business rationale, together with the contracts, the settlements and the economic data. We also need information on the parties and on the period the agreement is to cover. Where the documentation leaves gaps, we raise follow-up questions before the application is finalised, because the value of the agreement depends on the facts presented being complete and accurate.
Scope and fee
The price is quoted from EUR 3500 net. It depends on the complexity of the transaction, on the number of years covered, on the scope of the comparability analyses and on how long the procedure with the authority takes. The administrative filing fee is an external cost and is not included. Proceedings before an administrative court, and analyses of controlled transactions other than the one covered by the application, require a separate engagement. The conclusions follow from the facts established and the applicable rules, so the engagement does not guarantee the position the authority will take.