On 26 February 2019, Advance Pricing and Mutual Agreement (APMA) program of IRS, released an excel based functional cost diagnostic model (FCD Model) that is developed in connection with several prior and pending Bilateral Advance Pricing Agreements (APAs) and Competent Authority/Mutual Agreement Procedure (MAP) cases. The Functional Cost Diagnostic Model (FCD Model) collects, identifies, organizes and analyzes the costs incurred by each controlled taxpayer related to the covered transactions. It then computes a pro forma profit (loss) split. APMA will compare the pro forma profit split results to the results achieved under the transfer pricing method proposed in a taxpayerās APA request. APMA assures taxpayers that it will use the FCD Model in limited circumstances, only for diagnostic purposes, and its application does not imply that the residual profit split is necessarily the āmost appropriate methodā under the OECD guidelines for the covered transactions.
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