IOTA Case Study Workshop on ‘Transfer Pricing Challenges in Advance Pricing Agreements’

This workshop highlighted the latest experiences of IOTA member tax administrations in negotiating Advance Pricing Agreements (APAs) with other tax authorities or directly with taxpayers, with a focus on arm's length analysis and pricing of controlled transactions. Throughout the workshop, five carefully selected case studies were presented out of 24 submitted from IOTA member tax administrations, namely those from Finland, France, Germany, Lithuania, and Spain.

On the first day, participants examined case studies from Spain and Lithuania. They engaged in smaller breakout sessions, which facilitated the exchange of views, ideas, and experiences regarding the APA process. The first case study involved a group company engaged in the sale of tangible fashion products, presented by Natalia Gascón and Carlos Rubio from the Spanish Tax Administration. After reviewing a summary of the group operations, the Functional, Asset, and Risk (FAR) analysis, and the controlled transactions, several questions were posed to the participants.

The second case study, presented by Joana Lileikė and Vaide Riskute from the Lithuanian Tax Administration, focused on a company involved in the cryptocurrency sector that provides payment administration and exchange services for various digital currencies. The presentation included background information about the case, followed by a series of predetermined questions directed at the experts to facilitate discussion. This approach aimed to encourage the sharing of diverse perspectives and experiences related to the case. Participants were divided into four groups to brainstorm and collaboratively establish their potential stance on the situation.

The second day featured a new set of case study presentations. Speakers from IOTA member countries, including Finland and France, shared valuable insights on negotiating Advance Pricing Agreement (APA) agreements, highlighting best practices and strategies to streamline and enhance the APA process.

The third case study, presented by Sami Laaksonen from the Finnish Tax Administration, examined a company operating in the manufacturing and distribution of premium products. The discussion raised issues concerning financial transactions and arm’s length remuneration of counterparties.

The fourth case study, delivered by Edina Mahmutovic and Imtiaz Mohammed from the French Tax Administration, analysed a company in the chemical sector that applied for a bilateral APA, utilizing various pricing methods based on the nature of each transaction covered in the APA application.

The final day of the workshop included a case study presentation from Germany, focusing on a company in the automobile industry. Various issues were raised and discussed in groups, including the selection of the tested party, how to handle upfront costs, and the number of years to include in the comparable data sample. This presentation was led by Tobias Mönch from the German Tax Administration. All case studies were also discussed by workshop participants in smaller breakout sessions, allowing for the exchange of views, ideas, and experiences on the topics presented.

As the event came to a close, participants were surprised when Santa Claus secretly popped into the conference room, bringing them gingerbread and various delicious cookies on his way from Germany to Budapest. Attendees were grateful for these delightful German treats, Tobias!

All materials, presentations, and a photo gallery from the event are now available online, and the event recording will be posted soon on the event’s webpage. This event was facilitated by IOTA International Taxation Expert Alexandros Roukalis, with support from his colleague Ivana Donchevska.