Record Details

Practical Valuation of Risk Transfer in Advance Pricing Agreements

Journal of Tax Administration

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Field Value
 
Title Practical Valuation of Risk Transfer in Advance Pricing Agreements
 
Creator Afik, Zvika
Lahav, Yaron
 
Description A recently published paper argues that Advance Pricing Agreements adopting the Comparable Profits Method or the Transactional Net Margin Method, overlook the risk transferred from the tested party (subsidiary) to the party related to the transaction (parent) - a shift caused by fixing the profitability of the tested party. In this paper, we propose a practical implementation methodology to estimate the model parameters and discuss the theoretical and practical reasons for our proposed method. Finally, we also provide numerical examples demonstrating the miss-allocation of profits and taxes. According to our examples, fixing the profitability level of a manufacturer equals a shift of 0.5% of its profitability, while fixing the profitability of a management entity means a shift of 0.85% of its profitability. These amounts can be significant on aggregate levels.
 
Publisher Journal of Tax Administration
 
Contributor —
 
Date 2018-05-08
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://JoTA.website/article/view/164
 
Source Journal of Tax Administration; Vol 4, No 1 (2018)
2059-190X
 
Language eng
 
Relation http://JoTA.website/article/view/164/123
 
Rights Copyright (c) 2018 Journal of Tax Administration