Governments Being ‘Practical’ About Tax Agreement Adjustments

Governments and companies are being “practical” about adjusting their tax agreements in light of the pandemic, an IRS official said Tuesday.

Companies and tax authorities enter into advance pricing agreements, or APAs, to give certainty to both sides about the company’s transfer pricing arrangements—for related-company transactions—over a set period of time.

Covid-related economic disruptions had raised concerns that companies wouldn’t meet the terms set out in their APAs, but the IRS has encountered “accommodation by the different stakeholders” in dealing with pandemic-related APA issues, said John Hughes, director of the IRS’s Advance Pricing and Mutual Agreement Program. He was speaking ...