Overview
The annual Announcement and Report Concerning APAs for 2024 is the 26th report of its kind issued by APMA. Each annual report provides statistical data and general descriptions with respect to APA applications filed and executed during the previous calendar year, as well as the structure, composition and operation of the APMA Program.
As multinational corporations seek to gain certainty with respect to their worldwide transfer pricing policies, the demand for APAs remains high. APAs are agreements that allow taxpayers to preemptively agree with one or more tax authorities on arm’s-length prices for related-party transactions. An executed APA determines the best transfer pricing methodology and agrees upon results that satisfy the arm’s-length standard. Generally, an APA covers a five year prospective term, however, some APAs with rollback terms can reach up to 15 year terms.
APA applications remain high
During 2024, a total of 1691 APA applications were filed, representing a slight increase (from 167 APA applications filed in 2023). While the number of APA applications remained high, this minimal growth is in contrast to the approximately 9% decline in 2023 and 20-25% growth in APA applications filed each year between 2020 and 2022, in which 121, 145 and 183 APA applications were filed, respectively. Consistent with prior years, the majority of the APA applications filed during 2024 were bilateral. The key countries for bilateral APA applications during 2024 were Japan (32%), India (26%), Canada (10%) and Mexico (6%).
APAs executed in shorter timeframe in 2024
As of Dec. 31, 2024, the APMA Program included three assistant directors, 12 managers, 35 economists and 76 team leaders to manage the large number of APA applications. During 2024, a total of 142 APAs were executed, leaving 560 pending APAs as of Dec. 31, 2024. The number of executed APAs in 2024 nears the record number of 156 APAs executed in 2023, and is almost double those executed in 2022. Of the 560 pending APAs, 267 were renewals. The median time to execute an APA decreased to 33.5 months in 2024 (from 42.0 months in 2023). This timeline is approaching the lowest in recent years (including 35.1 months in 2021 and 32.7 months in 2020).
In terms of industry, wholesale/retail trade and manufacturing continue to lead with respect to executed APAs, constituting 57%. Across all industries, the most common intercompany transactions to be covered in an executed APA are the sale of tangible goods and the provision of services, totaling 76% of transactions during 2024. In addition, intercompany transactions involving the use of intangible property constituted approximately 22% of intercompany transactions in APAs executed during 2024. APMA has noted in recent years that intangible transactions “can be among the most challenging transactions in APMA’s inventory.”2
Conclusion
As evidenced by the near record number of APAs executed – in a shorter time frame – in 2024, APAs continue to offer a proactive approach for taxpayers to gain greater certainty regarding tax exposure and mitigate costs associated with the preparation of transfer pricing documentation and audit defense. In recent years, taxpayers have increasingly utilized APAs as the preferred transfer pricing dispute mechanism as they provide taxpayers with a non-adversarial alternative and proactive process to resolve transfer pricing disputes.
