10/07/20

INTERNATIONAL TAX: Governments Unlikely to Revisit Tax Agreements During Pandemic.

As published on news.bloombergtax.com, Thursday 9 July, 2020.

Governments aren’t looking this year to renegotiate the tax agreements they’ve made with companies, even if those agreements are affected by the pandemic, an IRS official said Thursday.

“No competent authorities I know of are eager to begin revisiting APAs,” said John C. Hughes, director of the IRS Advance Pricing and Mutual Agreement program, referring to advance pricing agreements. “We have enough in the pipeline.”

Multinationals are finding that virus-related shutdowns and an economic downturn are changing the facts and circumstances of those arrangements, prompting them to seek help from tax authorities.

“While we are aware that we will need to be standing ready to take appropriate action, it almost at times does feel a bit premature to act in any kind of broad significant way, just not knowing what the full ramifications of current situations may be, even at the end of the year,” Hughes said on a webcast hosted by Grant Thornton LLP.

APAs are contracts multinational companies sign with governments to pre-approve their transfer pricing arrangements over a set period of time. Having an APA can help a company gain more tax certainty and reduce risks for future disputes.

As the virus continues to unfold, more data and information about how companies fared may not be available until early next year, Hughes said, adding that the IRS wants taxpayers to work with them and not unilaterally seek to break an APA.

“In general, what we’re asking taxpayers to do is watch, monitor, be prepared to come in,” he said. “If we need to engage with a treaty partner, we will.”