See this checklist (PDF, 1MB)This link will download a file for a summary of the documentation required to ensure you are prepared for both the early engagement (stage 1) and application (stage 2) phases of your APA.
Continue reading below for a more comprehensive guide on what should be included in this documentation.
If there are a lot of records or documents to support your formal APA application, we may agree that some or all of these need not be provided with the application. Such documents should be referenced in the APA application and made available if requested.
a) Actual conditions
- The multinational entity (MNE) and company group of which you are a member, including details of the ownership and organisational structure and geographical locations.
- The global value chain of the MNE including identification of the important drivers of business profits and your contribution to that global value chain.
- In the case of the bilateral or multilateral APA, the countries of residence of the other parties and the countries in which they conduct business.
- A description of the size, nature or characterisation and value of the covered cross-border dealings.
- A list and brief description of important international agreements between members of the MNE group.
- A description of the actual economic activity occurring between members of the MNE group.
- Where the form of the cross-border dealings differs from their actual economic activity, an explanation of why you consider this to be the case.
- A description of the industry and the main geographic markets in which you operate.
- An explanation of your position in the industry, including a list of major competitors.
- A functional analysis describing the principal contributions to value creation by individual entities within the group, that is key functions performed, important risks assumed and important assets used.
b) Arm’s length conditions
- Proposed sources of comparable data and the key characteristics or criteria to be met by uncontrolled transactions in order to be regarded as potentially comparable.
- A description of the proposed comparables and an analysis of the key comparability factors between the comparables and your entity.
- Details and calculations of any proposed adjustments to the comparables results.
c) Proposed transfer pricing method
- A description of the proposed transfer pricing methodologies and the reasons why you consider that method the most appropriate.
- Whether or not you currently use a recognised transfer pricing method to test or set the actual transfer prices of cross-border dealings. If not, what method you use to set your prices.
- Where applicable, a description of the most appropriate profit level indicator and the reasons for its selection.
- Sufficient data to apply the transfer pricing methodology and to demonstrate that the outcome produced is arm's length.
- The proposed arm's length outcome or range which results from the application of the transfer pricing methodology.
- The process by which you propose to make any necessary adjustments to your actual results during the APA (compensating adjustments) and the reasons for your choice of process.
d) Expected results
- Likely or forecast outcomes from the proposed methodology (including sensitivity analysis indicating factors that impact profitability and how sensitive profitability is to changes in those factors) during the term of the APA.
e) Critical assumptions
- The APA application should define any factors or assumptions that are so significant that if they were to change in specified ways, the appropriateness of the terms of the proposed APA, or the basis upon which it was agreed, would be challenged and neither party in an arm’s length situation would continue to be bound by the terms of the APA.
f) Other information
- Information or documentation (or both) as agreed in the early engagement stage.
- The tax and financial position of all parties involved in the APA, or at the aggregate tax jurisdiction wide level, for the last 3 years, including
- earnings
- profit (loss) before income tax
- tangible assets other than cash and cash equivalents
- number of employees
- any other relevant data.
- Information on forecast or budgeted financial position during the APA period for all parties involved in the APA.
- Any other information that may be of assistance in progressing your APA application.