The Bilateral Advance Pricing Agreement (BAPA) Manual issued by the Forum on Tax Administration (FTA) on 28 September 2022 was formulated after considering answers to surveys of jurisdictions, competent authorities and the advisory group Business at the OECD (formerly BIAC). Competent authorities were asked to identify any obstacles and possible improvements to the BAPA process, in relation to their own practices and that of treaty partners and taxpayers. The taxpayers were asked about their experiences with specific BAPA programmes and jurisdictions.

On the basis of the views submitted the FTA has issued the BAPA Manual outlining best practices to streamline the BAPA processes undertaken by jurisdictions. The Manual is intended to supplement the OECD Transfer Pricing Guidelines and the Annex to Chapter IV on Advance Pricing Arrangements. The Manual provides a range of sample documents that may assist jurisdictions and taxpayers.

Best Practice

The Manual notes that the commentary to the relevant Model Tax Conventions and the international transfer pricing guidelines are an appropriate basis for a principled approach to BAPAs. The positions of the competent authority and taxpayer should be based on analysis carried out in line with the applicable bilateral tax treaty, the domestic laws of the relevant jurisdictions and the international transfer pricing guidance.

Taxpayers should file their tax returns in the relevant jurisdictions in the proposed covered years based on the positions taken in their BAPA application. Jurisdictions with BAPA programmes should have clear published rules, guidelines and procedures, setting out how taxpayers can access the BAPA process and outlining relevant steps in the process. The Manual recommends that jurisdictions should make greater use of technology throughout the BAPA process.

In terms of a timeline for completion, jurisdictions and taxpayers should aim to complete a BAPA agreement within 30 months from the receipt of the application by both competent authorities.

Taxpayers should notify both competent authorities of their potential BAPA application beforehand, and taxpayers may engage in preliminary discussions with one of the competent authorities. The taxpayer should notify the other competent authority when it is ready to submit a BAPA application. The taxpayer should submit the applications (containing the same information) to both competent authorities. The case officers, competent authorities and taxpayers should stay in regular contact during the BAPA process.

Jurisdictions should aim to reach a decision on accepting a BAPA application within 30 days and inform the taxpayer and the respective treaty partner of any decision. If a decision cannot be made within 30 days, the competent authority should inform the taxpayer and the treaty partner of the expected decision date.

On acceptance of an application the competent authorities and the taxpayer should agree a project plan with a timeline for each stage of the process. Information gathering should be coordinated between the competent authorities, to limit duplication of work.

The Manual notes that the term of a BAPA should generally be a minimum of five years.