IRS reports advance pricing agreement activity for 2025
2025 Annual Report on Advance Pricing Agreements (APAs)
Demand for APAs is still strong, but it usually takes close to four years to complete one. This makes the program dependable, but slow, for getting transfer pricing certainty.
Overview of the Report
The IRS has published its annual report on Advance Pricing Agreements (APAs) for 2025. The report covers the number of applications, completed agreements, processing times, and key trends in the APMA program.
Why It Matters
Routine but important: Annual APA reports do not change the law, but they signal how transfer pricing is administered in practice.
Processing delays persist: Completion times remain long, especially for bilateral APAs, affecting planning timelines.
Bilateral dominance continues: Most applications and completed cases involve foreign tax authorities, reinforcing treaty-driven enforcement.
Method consistency: Continued reliance on CPM or TNMM confirms IRS preference for profit-based methods over transaction-based methods.
Key Data Points
Applications (2025):
178 total applications filed
23 unilateral
153 bilateral
2 multilateral
Executed APAs (2025):
110 total executed
14 unilateral
90 bilateral
6 multilateral
Pending Inventory (year-end 2025):
622 pending cases
543 bilateral cases dominate the backlog
Withdrawals:
10 applications withdrawn in 2025
Processing Time
New APAs:
~50 months for bilateral cases
Renewals:
~38 months overall
Translation: expect 3 to 4 years unless everything goes unusually well, which it rarely does.
Structural and Transaction Trends
Relationships:
Even split between:
U.S. parent with foreign subsidiary
Foreign parent with U.S. subsidiary
Transaction types:
Services dominate APA coverage
Tangible goods and intangibles follow
Tested parties:
Non-U.S. service providers increased significantly
U.S. entities are now less than half of the tested parties
Transfer Pricing Methods
CPM/TNMM is used in 86% of cases
Operating margin is the most common profit level indicator
Berry ratio and return-on-sales are used less frequently
The IRS continues to favor methods that reduce arguments, even if they flatten economic nuance.
APA Terms and Structure
Average term: 6 years
Most agreements target at least 5 years
23% include rollback years
Adjustments:
Results outside the range require adjustment to the median or the nearest boundary
Critical assumptions:
No material business or accounting changes
Violation can trigger cancellation
Compliance Requirements
Annual reports are required for each APA year
IRS reviews compliance contemporaneously
Documentation must reconcile financial data with APA methodology
Result
The IRS released its 2025 APA report, showing steady demand, a strong focus on bilateral agreements, and ongoing long processing times.g times.
The Takeaway
APAs remain the most organized way to manage transfer pricing risk, but they require a lot of time. The IRS also continues to standardize results using profit-based methods rather than examining each transaction individually.