The US Internal Revenue Service completed 110 advance pricing agreements in 2025, down 23% from the previous year, as staffing levels fell to 108 from 126. Meanwhile, applications rose to 178 and processing times climbed to a median of 41.6 months, creating a backlog of 622 pending agreements amid growing taxpayer demand for transfer pricing certainty.
The US Internal Revenue Service (IRS) released Announcement 2026-08 on 30 March 2026, revealing a decline in advance pricing agreements executed during 2025.
The annual report from the Advance Pricing and Mutual Agreement (APMA) Program shows the agency completed 110 APAs last year, down from 142 in 2024 and 156 in 2023. This marks the 27th annual report detailing the APMA programme’s operations, focusing on transfer pricing arrangements that determine how transactions between related companies are valued for tax purposes.
Staffing shortages drive backlog
The decline in completed agreements coincided with substantial staffing reductions at APMA. The office’s workforce dropped to 108 employees in 2025 from 126 the previous year, following widespread cuts and departures across the agency. This staffing shortage has contributed to a growing backlog of pending agreements despite increased demand from taxpayers.
Applications for new APAs actually increased from 169 in 2024 to 178 in 2025, creating additional pressure on the understaffed programme. The median completion time for both new and renewal APAs jumped significantly from 33.5 months in 2024 to 41.6 months in 2025, with the average reaching 44.1 months.
Statistical trends in 2025
- Applications and executions: In 2025, 178 complete APA applications were filed, the vast majority of which (153) were bilateral requests. During the same period, 110 APAs were executed, with renewals making up 50% of that total.
- Geographic focus: India and Japan remain the primary partners for bilateral APAs. In 2025, India accounted for 26% of bilateral applications and 35% of executed bilateral APAs, while Japan accounted for 24% of applications and 25% of executions.
- Pending workload: The number of pending requests increased by the end of 2025, reaching a total of 622 pending APAs.
Industry and transactional insights
- Primary industries: The Wholesale/Retail Trade (29%), Services (25%), and Manufacturing (20%) sectors represented the bulk of APAs executed in 2025.
- Shift in relationships: There was a notable shift in the types of corporate relationships covered. While previous years were dominated by non-US parents with US subsidiaries, 2025 saw an equal split (45% each) between US parent/non-US subsidiary and non-US parent/US subsidiary transactions.
- Service transactions: Most transactions covered in 2025 involved the provision of services, rather than the sale of tangible property or the use of intangible property.
Transfer pricing methods (TPM) and mechanics
- Dominant method: The Comparable Profits Method/Transactional Net Margin Method (CPM/TNMM) continued to be the most used, applied in 86% of tangible/intangible property transactions and 83% of service transactions.
- Profit level indicators (PLI): For these methods, the Operating Margin (OM) was the most frequent benchmark, used 57% of the time for property and 66% of the time for services.
- Tested parties: There was a significant change in tested parties; non-US service providers rose to 41% of tested parties (up from 31% in 2024), while US entities combined fell to 48%.
Timeline and compliance
- Completion time: Completing an APA is a multi-year process. In 2025, new APAs took an average of 49.8 months to complete, while renewals were faster at 38.2 months.
- Term length: The average term length for APAs executed in 2025 was six years.
- Compliance monitoring: Taxpayers are required to file annual reports to demonstrate compliance with the APA’s terms, and the APMA Programme uses these reports to monitor taxpayer results and the success of the chosen TPMs.
- Critical assumptions: APAs rely on “critical assumptions,” such as the requirement that there be no material changes to the taxpayer’s business, functions, or accounting methods during the term. Failure to meet these assumptions can lead to the cancellation or revision of the agreement.
