Advantages of APA. As with any other TP solving method there are both advantages and disadvantages to the APA, however as a whole the pros seem to overweigh the cons (Monsenego, 2007). MNEs use of an APA will provide the opportunity to negotiate what pricing method to use for transactions in complex situations for a specific period of time. This will drastically decrease the risk of audit and penalty assessment (Xxxxxxxxx, 2001) In countries where an effective application of TP legislations risk to posses problems, due to a potential lack of legal security it have become more and more common that APAs are being used. The risk of legal security can be caused by the complex nature of the TP legislations, but also by the tax authorities’ aggressive approaches in the subject. In such situations APA provides a greater legal security for, in most situations, a cost that is lower than the potential risks that could have been the case if an APA was not applied (Xxxxxxxx, 2005). By enhancing the predictability of tax treatment in international transactions the APA can eliminate the uncertainty that corporations can feel in such situations (OECD TP guidelines, 1995). If a corporation before performing large, money intensive transactions gets notifications concerning the principles of calculating a TP, it can reduce, however not eliminate, the risk of unpleasant surprises that can arise after the transaction (Xxxxxxxx and Xxxxxxxx, 2009). However, if an APA shall provide certainty for TP issues over a specific period of time, then the corporations have to meet the critical assumptions of the APA. The APA also have the advantage that when expired it can be renegotiated, which provides for the option to extend the period of time of which the APA shall apply. Another advantage that comes with the certainty of APAs is that corporations more easily can predict their tax liabilities, which in turn provides for a tax environment that is favorable for investments. APA can help to stimulate a free flow of information between all parties involved, since it provides for a less confronting atmosphere than is the case in TP examinations. This free flow of information helps to reach a practicably workable and legally correct result. It can also help in achieving more objective reviews of information and data than what would otherwise be the case. The process of APA will also help enhance closer relationships between the involved parties (OECD TP guidelines, 1995). Examinations concerning TP are ofte...
