What aspects will the SAT focus on during a case selection process for APAs?
SAT Commissioner Mr. Xuren Xie signed the bilateral APA during his visit to Washington, D.C. last week, after two rounds of negotiations that started in June 2006 and concluded on 22 December.
Wal-Mart is the taxpayer that obtained the APA, according to the official announcement by the SAT.
This case will certainly provide taxpayers assurance on making use of treaty provisions in negotiating for prospective, as well as renewing, bilateral APAs, thus minimizing any potential double taxation that can occur from carrying out business globally.
The SAT issued China’s formal APA rules in September 2004 and has recently indicated that during its case selection process it will focus on technical aspects of transfer pricing, as well as cutting-edge topics such as intangibles and cost sharing.
An APA is an agreement concluded between the relevant tax authority and a taxpayer that allows transfer pricing issues related to transactions between associated enterprises, such as pricing policies and calculation methods and other relevant important assumptions, to be determined for a given period in the future, generally four years. Under the SAT APA rules, the agreed APA terms can be rolled back to the year in which the APA application was submitted although rollback to earlier years is negotiable and not guaranteed.