Announcement and Report Concerning Advance Pricing Agreements

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ANNOUNCEMENT AND REPORT

CONCERNING

ADVANCE PRICING AGREEMENTS

March 27, 2023

This Announcement is issued pursuant to § 521(b) of Pub. L. 106-170, the Ticket to Work and

Work Incentives Improvement Act of 1999, which requires the Secretary of the Treasury to

report annually to the public concerning advance pricing agreements (APAs) and the Advance

Pricing and Mutual Agreement Program (APMA Program), formerly known as the Advance

Pricing Agreement Program (APA Program). The first report covered calendar years 1991

through 1999. Subsequent reports covered each calendar year 2000 through 2021 separately.

This twenty-fourth report describes the experience, structure, and activities of the APMA

Program during calendar year 2022. It does not provide guidance regarding the application of the

arm’s length standard.

Part I of this report includes information on the structure, composition, and operation of the

APMA Program; Part II presents statistical data; and Part III includes general descriptions of

various elements of the APAs executed in 2022, including types of transactions covered, transfer

pricing methods used, and completion time.

John M. Wall

Acting Director, APMA Program

Part I. The APMA Program – Structure, Composition, and Operation

[Pub. L. 106-170 § 521(b)(2)(A)]

In February 2012, the former APA Program was moved from the Office of Chief Counsel to the

Office of Transfer Pricing Operations1 within the Large Business and International Division of

the IRS and combined with the U.S. Competent Authority staff responsible for transfer pricing

cases, thereby forming the APMA Program (APMA).

As of December 31, 2022, APMA’s APA cases were handled by 59 team leaders, 26 economists,

9 managers, and 3 assistant directors.2 Each assistant director oversees three managers who lead

teams consisting of both team leaders and economists

ivision of

the IRS and combined with the U.S. Competent Authority staff responsible for transfer pricing

cases, thereby forming the APMA Program (APMA).

As of December 31, 2022, APMA’s APA cases were handled by 59 team leaders, 26 economists,

9 managers, and 3 assistant directors.2 Each assistant director oversees three managers who lead

teams consisting of both team leaders and economists. APMA’s main office is in Washington,

DC, and it also has offices in northern California (San Francisco and San Jose), southern

California (Los Angeles and Laguna Niguel), Chicago, and New York.

On August 31, 2015, a new revenue procedure governing APA applications was published in

2015-35 I.R.B. on page 263. Revenue Procedure (Rev. Proc.) 2015-41 provides guidance,

information and instructions on APA requests and the administration of APAs. Rev. Proc. 2015-

41 updates and supersedes Rev. Proc. 2006-9, 2006-1 C.B. 278, as modified by Rev. Proc. 2008-

31, 2008-1 C.B. 1133, which is also superseded.

Model APAs appear as appendices to this report. Appendix 1 is the model for APAs covered by

Rev. Proc. 2006-9. Appendix 2 is the current model APA for APAs covered by Rev. Proc. 2015-

41. A list of primary APMA contacts is available at

https://www.irs.gov/businesses/corporations/apma-contacts.

1 In 2017, Transfer Pricing Operations became Treaty & Transfer Pricing Operations (“TTPO”).

2 In late 2020, TTPO’s Treaty Assistance and Interpretation Team (TAIT) joined APMA, bringing the total number

of groups in APMA to four. The three legacy APMA groups have primary responsibility for cases arising under the

business profits and associated enterprises articles of U.S. tax treaties. TAIT endeavors to resolve competent

authority issues arising under all other articles of U.S. tax treaties including issues arising under U.S. tax treaties

relating to estate and gift taxes

ng the total number

of groups in APMA to four. The three legacy APMA groups have primary responsibility for cases arising under the

business profits and associated enterprises articles of U.S. tax treaties. TAIT endeavors to resolve competent

authority issues arising under all other articles of U.S. tax treaties including issues arising under U.S. tax treaties

relating to estate and gift taxes. As such, TAIT is separate from APMA’s APA program, and the total numbers of

team leaders and managers handling APA cases do not include TAIT analysts and managers.

Part II. APMA Program Statistical Data

[Pub. L. 106-170 § 521(b)(2)(C)(i-viii)]

Table 1: APA Applications Filed

§ 521(b)(2)(C)(i)

Unilateral

Bilateral

Multilateral

Total

Filed 1991-19993

401

Filed 2000-2021

653

1,845

2,535

Filed in 2022

154

183

Total Filed 1991-2022

3,119

The charts above illustrate the number of complete applications filed per year and the percentage

of bilateral requests received in 2022 per foreign country. As of December 31, 2022, APMA had

also received 34 user fee filings that were not yet accompanied by a substantially complete APA

application, in addition to the 183 complete APA applications.

3 The first APA Statutory Report, which compiled APA data from 1991-1999, did not report the cumulative number

of applications for those years by submission type, so the cumulative totals cannot be reported in that manner

22, APMA had

also received 34 user fee filings that were not yet accompanied by a substantially complete APA

application, in addition to the 183 complete APA applications.

3 The first APA Statutory Report, which compiled APA data from 1991-1999, did not report the cumulative number

of applications for those years by submission type, so the cumulative totals cannot be reported in that manner.

100

150

200

250

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Applications Filed

2013-2022

Japan

29%

India

14%

Canada

11%

Korea

10%

Italy

United Kingdom

Mexico

Switzerland

Germany

Netherlands

All Other Countries

Bilateral APAs

Filed by Country 2022

Table 2: Executed4 and Pending APAs

§ 521(b)(2)(C)(ii-vi)

Unilateral

Bilateral

Multilateral

Total

Total Executed 1991-2021

687

1,483

2,191

Total Executed in 2022

Total Executed 1991-2022

697

1,549

2,268

Total Pending as of 12/31/2022

480

564

Renewals Executed in 20225

Renewals Pending6 as of 12/31/2022

185

237

In 2022, the percentage of renewals executed decreased (55 percent of all APAs executed in

2022 versus 63 percent in 2021). The charts above illustrate trends in the number of APAs

executed per year and the countries involved in the bilateral APAs that were executed in 2022.

4 “Executed APAs” refers to APAs that were finalized and includes both initial and renewal APAs.

5 The number of renewals executed is included in the total number of APAs executed during the year.

6 The number of renewals still pending as of year-end is also included in the total number of pending APAs

cuted per year and the countries involved in the bilateral APAs that were executed in 2022.

4 “Executed APAs” refers to APAs that were finalized and includes both initial and renewal APAs.

5 The number of renewals executed is included in the total number of APAs executed during the year.

6 The number of renewals still pending as of year-end is also included in the total number of pending APAs.

100

150

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

APAs Executed

2013-2022

Japan

39%

Canada

14%

India

Switzerland

Germany

Italy

Korea

Belgium

China

Finland

United Kingdom

All Other Countries

Bilateral APAs

Executed by Country 2022

As the top chart illustrates, the number of pending requests increased relative to December 31,

2021. As of December 31, 2022, almost half of the pending bilateral APA requests involved

either Japan or India.

Table 3: APAs Revoked or Cancelled and Applications Withdrawn

§ 521(b)(2)(C)(vii)

Unilateral

Bilateral

Multilateral

Total

Revoked or Cancelled 1991-20007

Revoked or Cancelled 2001-2021

Revoked or Cancelled in 2022

Total Revoked or Cancelled 1991-2022

Withdrawn 1991-20008

Withdrawn 2001-2021

152

229

Withdrawn in 2022

Withdrawn 1991-2022

284

Table 4: APAs Executed in 2022 by Industry

7 The first APA Statutory Report, which compiled APA data from 1991-1999, and the second APA Statutory

Report, which compiled APA data for 2000, did not report the cumulative number of applications for those years by

submission type, so the cumulative totals cannot be reported in that manner.

8 See supra note 7

Withdrawn 1991-2022

284

Table 4: APAs Executed in 2022 by Industry

7 The first APA Statutory Report, which compiled APA data from 1991-1999, and the second APA Statutory

Report, which compiled APA data for 2000, did not report the cumulative number of applications for those years by

submission type, so the cumulative totals cannot be reported in that manner.

8 See supra note 7.

200

400

600

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Pending APAs

2013-2022

Japan

24%

India

22%

Canada

11%

Korea

Italy

Mexico

Germany

United Kingdom

Switzerland

All Other Countries

14%

Pending Bilateral APAs

by Country

§ 521(b)(2)(C)(viii)

Industry

Wholesale/Retail Trade

Manufacturing

Services

Finance, Insurance, and Real Estate

All Other Industries

Table 4a: Manufacturing APAs Executed in 2022

Type of Manufacturing

Chemical

Computer and Electronic Product

Transportation Equipment

Miscellaneous9

All Other Manufacturing

9 Industries in the Miscellaneous Manufacturing subsector (NAICS Code 339) make a wide range of products that

cannot readily be classified in specific NAICS manufacturing subsectors.

Wholesale/Retail

Trade

42%

Manufacturing

40%

Services

13%

Finance, Insurance

and Real Estate

All Other Industries

APAs Executed

in 2022 by Industry

Chemical

Manufacturing

42%

Transportation

Equipment

Manufacturing

19%

Miscellaneous

Manufacturing

Computer and

Electronic Product

Manufacturing

29%

All Other

Manufacturing

Types of Manufacturing APAs

Executed in 2022

Table 4b: Wholesale/Retail Trade APAs Executed in 2022

Type of Wholesale/Retail Trade

Merchant Wholesalers, Durable Goods

Merchant Wholesalers, Nondurable Goods

All Other Wholesalers

Merchant

Wholesalers, Durable

Goods

75%

Merchant

Wholesalers,

Nondurable Goods

12.5%

All Other

Wholesalers

12.5%

Types of Wholesale/Retail Trade APAs

Executed in 2022

Part III

Executed in 2022

Type of Wholesale/Retail Trade

Merchant Wholesalers, Durable Goods

Merchant Wholesalers, Nondurable Goods

All Other Wholesalers

Merchant

Wholesalers, Durable

Goods

75%

Merchant

Wholesalers,

Nondurable Goods

12.5%

All Other

Wholesalers

12.5%

Types of Wholesale/Retail Trade APAs

Executed in 2022

Part III. General Descriptions of APAs Executed in 2022

[Pub. L. 106-170 § 521(b)(2)(D) and (E)]

Nature of the Relationships

§ 521(b)(2)(D)(i)

As in prior years, more than half of the APAs executed in 2022 involved transactions between

non-U.S. parents and U.S. subsidiaries.

Covered Transactions, Functions and Risks, and Tested Parties

§ 521(b)(2)(D)(ii-iii)

Most of the transactions10 covered in APAs executed in 2022 involve the sale of tangible goods

or the provision of services. Twenty-two percent of the transactions involve the use of intangible

property, which can be among the most challenging transactions in APMA’s inventory.

In the majority of APAs, the covered transactions involve numerous business functions and risks.

For instance, with respect to functions, APAs involving manufactured products typically involve

10 APAs often cover more than one type of transaction.

Non-U.S. Parent &

U.S. Subsidiary

62%

U.S. Parent &

Non-U.S.

Subsidiary

31%

Sister Companies

Relationships between Controlled Parties

Sale of Tangible

Property into the U.S.

23%

Sale of Tangible

Property from the

U.S.

14%

Use of Intangible Property

by a U.S. Entity

10%

Use of Intangible

Property by a Non- U.S.

Entity

12%

Provision of Services

by a U.S. Entity

23%

Provision of Services by a

Non-U.S

t &

U.S. Subsidiary

62%

U.S. Parent &

Non-U.S.

Subsidiary

31%

Sister Companies

Relationships between Controlled Parties

Sale of Tangible

Property into the U.S.

23%

Sale of Tangible

Property from the

U.S.

14%

Use of Intangible Property

by a U.S. Entity

10%

Use of Intangible

Property by a Non- U.S.

Entity

12%

Provision of Services

by a U.S. Entity

23%

Provision of Services by a

Non-U.S. Entity

16%

All Other Types of

Transactions

Types of Covered Transactions

a controlled group that conducts research and development (R&D), engages in product design

and engineering, manufactures the product, markets and distributes the product, and performs

support functions such as legal, finance, and human resources. Regarding risks, the controlled

group may assume a variety of risks, including market risks, R&D risks, financial risks, credit

and collection risks, product liability risks, and general business risks. In the APA evaluation

process, a significant amount of time and effort is devoted to understanding how the functions

and risks are allocated among the controlled group of companies that are party to the covered

transactions. For methods requiring the selection of a tested party, the tested party chosen

generally will be the least complex of the controlled taxpayers.

Consistent with prior years, a majority of tested parties11 in 2022 were U.S. distributors, U.S.

manufacturers, or U.S. service providers.

Transfer Pricing Methods Used

§ 521(b)(2)(D)(iv)

In 2022, the most commonly used transfer pricing method (TPM) for both the sale of tangible

property and the use of intangible property continued to be the comparable profits

method/transactional net margin method (CPM/TNMM). The CPM/TNMM was used for 77

percent of these types of transactions.

For covered transactions involving tangible and intangible property that used the CPM/TNMM,

the operating margin (OM) is still the most common profit level indicator (PLI) used to

benchmark results

and the use of intangible property continued to be the comparable profits

method/transactional net margin method (CPM/TNMM). The CPM/TNMM was used for 77

percent of these types of transactions.

For covered transactions involving tangible and intangible property that used the CPM/TNMM,

the operating margin (OM) is still the most common profit level indicator (PLI) used to

benchmark results. It was used 73 percent of the time. Other PLIs, such as the Berry Ratio and

return on total cost, made up the other 27 percent. As used here, “OM” is defined as the ratio of

operating profit to sales,12 and “Berry Ratio” is defined as the ratio of gross profit to operating

expenses.13 Most services transactions (80 percent) also used the CPM/TNMM with the OM and

11 Not all the executed APAs involve a tested party.

12 See Treas. Reg. § 1.482-5(b)(4)(ii)(A).

13 See Treas. Reg. § 1.482-5(b)(4)(ii)(B).

U.S. Distributor

34%

U.S. Manufacturer

21%

U.S. Service Provider

Non-U.S. Distributor

19%

Non-U.S. Service

Provider

18%

All Other Types of

Tested Parties

Types of Tested Parties

operating profit to operating expense being the most common PLIs (used 53 percent of the

time).14

Sources of Comparables, Comparables Selection Criteria, and Nature of Adjustments to

Comparables or Tested Party Data

§ 521(b)(2)(D)(v-vii)

For the APAs executed in 2022 that involved the CPM/TNMM with a North American tested

party, the most widely used data source for comparables was Standard and Poor’s

Compustat/Capital IQ database. Different sources were used in other cases (e.g., where the tested

party was not a U.S. or Canadian entity or where transaction-based methods were applied). The

other most commonly used databases are listed in the table below.

Table 5: Sources of Comparable Data

Bureau van Dijk (BvD)

Prowess

Global Vantage

RoyaltySource

ktMINE

RoyaltyStat

Orbis

In making comparability adjustments, typical balance sheet adjustments, as identified in Treas.

Reg

party was not a U.S. or Canadian entity or where transaction-based methods were applied). The

other most commonly used databases are listed in the table below.

Table 5: Sources of Comparable Data

Bureau van Dijk (BvD)

Prowess

Global Vantage

RoyaltySource

ktMINE

RoyaltyStat

Orbis

In making comparability adjustments, typical balance sheet adjustments, as identified in Treas.

Reg. §§ 1.482-1(d)(2) and 1.482-5(c)(2)(iv), were made in most cases, including where

appropriate, adjustments for payables, receivables, inventory, and fixed assets. In addition, where

appropriate, adjustments for different accounting practices were made to convert from LIFO to

FIFO inventory accounting, and a small number of cases involved the accounting reclassification

of expenses, e.g., from COGS to operating expenses.

Ranges, Goals, and Adjustment Mechanisms

§ 521(b)(2)(D)(viii-ix)

Most transactions covered in APAs target an interquartile range or point within the interquartile

range as described in Treas. Reg. § 1.482-1(e)(2)(iii)(C), and other targeted arm’s length ranges.

Where the transaction involves a royalty payment for the use of intangible property, both specific

royalty rates and ranges have been used. Where the covered transaction is the sale or license of

intangible property, and the payment for such transfer would be a royalty based solely on

external comparable uncontrolled transactions, a secondary or confirming method, e.g., a test of

the post-royalty operating margin or cost-plus mark-up, has sometimes also been used. The

testing periods of the APAs executed in 2022 were either a single year, the term of the APA

only, or the term of the APA plus rollback years.

APAs executed in 2022 included several mechanisms for making adjustments to the tested

party’s results when the results fall outside the interquartile range or do not match the point

required by the APA

plus mark-up, has sometimes also been used. The

testing periods of the APAs executed in 2022 were either a single year, the term of the APA

only, or the term of the APA plus rollback years.

APAs executed in 2022 included several mechanisms for making adjustments to the tested

party’s results when the results fall outside the interquartile range or do not match the point

required by the APA. Examples of the mechanisms used include an adjustment bringing the

tested party’s results for a single year to either the closer edge of the range or the median of the

14 The majority of APAs that covered services transactions also included tangible/intangible transactions and are not

tested under a separate PLI.

range, an adjustment to bring the results over the APA term to the closer edge of the range, or an

adjustment to bring the results to a specified point or royalty rate.

Critical Assumptions

§ 521(b)(2)(D)(v)

The model APAs used by the IRS (included as Appendix 1 and Appendix 2 of this report)

include standard critical assumptions that there will be no material changes to the taxpayer’s

business or to its tax or financial accounting practices during the APA term. A few bilateral cases

have also included critical assumptions tied to the taxpayer’s profitability in a certain year or

over the term of the APA. Pursuant to § 7.06(3) of Rev. Proc. 2015-41, APMA will cancel an

APA in the event of a failure of a critical assumption unless the parties agree to revise the APA.

Term Lengths of APAs Executed in 2022

§ 521(b)(2)(D)(x)

Table 6: Term Lengths of APAs Executed in 2022

Term

Length

(years)

Number of

APAs

Average

As described in § 3.03(1) of Rev. Proc

5-41, APMA will cancel an

APA in the event of a failure of a critical assumption unless the parties agree to revise the APA.

Term Lengths of APAs Executed in 2022

§ 521(b)(2)(D)(x)

Table 6: Term Lengths of APAs Executed in 2022

Term

Length

(years)

Number of

APAs

Average

As described in § 3.03(1) of Rev. Proc. 2015-41, taxpayers should request an APA term that will

cover at least five prospective years and may also request that the APA be “rolled back” to cover

one or more earlier taxable years, although the appropriate APA term is decided on a case-by-case

basis. Of the APAs executed in 2022, 16 percent included rollback years. A substantial number

of those APAs with terms of greater than five years were submitted as a request for a five-year

term, and the additional years were agreed to between the taxpayer and the IRS (or, in the case of

a bilateral APA, between the IRS and the foreign government upon the taxpayer’s request) to

ensure a reasonable amount of prospectivity in the APA term.

Amount of Time Taken to Complete New and Renewal APAs

§ 521(b)(2)(E)

Table 7: Months to Complete New and Renewal APAs Executed in 2022

Unilateral

Bilateral

Unilateral & Bilateral

Average

Median

Average

Median

Average

Median

New

N/A

53.0

Renewal

22.9

17.7

36.6

30.6

33.6

28.3

New & Renewal

22.9

17.7

44.7

45.7

42.0

43.4

Months to Complete New and Renewal APAs Executed in 2022

Median completion time continued to rise in 2022 to 43.4 months (from 35.1 months in 2021and

32.7 months in 2020).

Efforts to Ensure Compliance with APAs

§ 521(b)(2)(F)

As described in § 7.02(1) of Rev. Proc. 2015-41, taxpayers are required to file annual reports to

demonstrate compliance with the terms and conditions of their APAs. The filing and review of

these annual reports are critical parts of the APA process

nued to rise in 2022 to 43.4 months (from 35.1 months in 2021and

32.7 months in 2020).

Efforts to Ensure Compliance with APAs

§ 521(b)(2)(F)

As described in § 7.02(1) of Rev. Proc. 2015-41, taxpayers are required to file annual reports to

demonstrate compliance with the terms and conditions of their APAs. The filing and review of

these annual reports are critical parts of the APA process. Through annual report review, the

APMA Program monitors taxpayer compliance with APAs on a contemporaneous basis. Annual

report review also provides current information on the success or problems associated with the

various TPMs adopted in the APA process.

Average

Median

Average

Median

Average

Median

Unilateral

Bilateral

Unilateral &

Bilateral

Months to Complete

Type of APA

New

Renewal

New &

Renewal

Nature of Documentation Required in Annual Report

§ 521(b)(2)(D)(xi)

APAs require taxpayers to file timely and complete annual reports describing their operations

and demonstrating compliance with the APA’s terms and conditions. Not every annual report

will include each of the items listed in the following table; they are required where the facts

demonstrate a need for such documentation. The requirements for the information to be included

in a specific APA annual report is included in Appendix C of the executed APA.

Statement regarding all material differences between Taxpayer’s business operations

during APA year and description of Taxpayer’s business operations contained in

Taxpayer’s APA request. If there are no material differences, a statement to that effect.

Statement concerning all material changes in Taxpayer’s accounting methods and

classifications, and methods of estimation, from those described or used in Taxpayer’s

request for the APA. If there has been no material change in accounting methods and

classifications or methods of estimation, a statement to that effect.

Any change to the Taxpayer notice information.

t to that effect.

Statement concerning all material changes in Taxpayer’s accounting methods and

classifications, and methods of estimation, from those described or used in Taxpayer’s

request for the APA. If there has been no material change in accounting methods and

classifications or methods of estimation, a statement to that effect.

Any change to the Taxpayer notice information.

Description of any failure to meet critical assumptions. If there has been none, a

statement to that effect.

Statement identifying whether any material information submitted while the APA

request was pending is discovered to be false, incorrect, or incomplete.

The amount, reason for, and financial analysis of any compensating adjustment, for the

APA year, including but not limited to the amounts paid or received by each affected

entity; the character (such as capital or ordinary expense) and country source of the

funds transferred, and the specific line item(s) of any affected U.S. tax return; and any

change to any entity classification for federal income tax purposes of any member of

Taxpayer’s group that is relevant to the APA.

The amounts, description, reason for, and financial analysis of any book-tax difference

relevant to the TPM for the APA year, as reflected on Schedule M-1 or Schedule M-3 of

the U.S. return for the APA year.

Statement regarding whether Taxpayer contemplates requesting, or has requested, to

renew, modify, or cancel the APA.

Financial statements and any necessary account detail to show compliance with the

TPM, with a copy of the opinion from an independent certified public accountant or

other documentation required by paragraph 5(f) of the APA.

10.

Financial analysis demonstrating Taxpayer’s compliance with TPM.

11.

Organizational chart.

12.

A copy of the APA and any amendment.

13.

A penalty of perjury statement

ial statements and any necessary account detail to show compliance with the

TPM, with a copy of the opinion from an independent certified public accountant or

other documentation required by paragraph 5(f) of the APA.

10.

Financial analysis demonstrating Taxpayer’s compliance with TPM.

11.

Organizational chart.

12.

A copy of the APA and any amendment.

13.

A penalty of perjury statement.

Approaches for Sharing of Currency or Other Risks

§ 521(b)(2)(D)(xii)

In appropriate cases, APAs may provide specific approaches for dealing with risks, including

currency risk, such as adjustment mechanisms and/or critical assumptions.

APPENDIX 1– Model APA (based on Rev. Proc. 2006-9)

ADVANCE PRICING AGREEMENT

between

[Insert Taxpayer’s Name]

and

THE INTERNAL REVENUE SERVICE

PARTIES

The Parties to this Advance Pricing Agreement (APA) are the Internal Revenue Service

(IRS) and [Insert Taxpayer’s Name], EIN ________.

RECITALS

[Insert Taxpayer Name] is the common parent of an affiliated group filing consolidated

U.S. tax returns (collectively referred to as “Taxpayer”) and is entering into this APA on behalf

of itself and other members of its consolidated group.

Taxpayer’s principal place of business is [City, State]. [Insert general description of

taxpayer and other relevant parties].

This APA contains the Parties’ agreement on the best method for determining arm’s-

length prices of the Covered Transactions under I.R.C. section 482, the Treasury Regulations

thereunder, and any applicable tax treaties.

{If renewal, add} [Taxpayer and IRS previously entered into an APA covering taxable

years ending _____ to ______, executed on ________.]

AGREEMENT

The Parties agree as follows:

Covered Transactions. This APA applies to the Covered Transactions, as defined in

Appendix A.

Transfer Pricing Method. Appendix A sets forth the Transfer Pricing Method (TPM) for

the Covered Transactions.

Term. This APA applies to the APA Term, as defined in Appendix A.

Operation.

ending _____ to ______, executed on ________.]

AGREEMENT

The Parties agree as follows:

Covered Transactions. This APA applies to the Covered Transactions, as defined in

Appendix A.

Transfer Pricing Method. Appendix A sets forth the Transfer Pricing Method (TPM) for

the Covered Transactions.

Term. This APA applies to the APA Term, as defined in Appendix A.

Operation.

Revenue Procedure 2006-9 governs the interpretation, legal effect, and

administration of this APA.

Nonfactual oral and written representations, within the meaning of sections 10.04

and 10.05 of Revenue Procedure 2006-9 (including any proposals to use particular TPMs), made

in conjunction with the APA Request constitute statements made in compromise negotiations

within the meaning of Rule 408 of the Federal Rules of Evidence.

Compliance.

Taxpayer must report its taxable income in an amount that is consistent with

Appendix A and all other requirements of this APA on its timely filed U.S. Return. However, if

Taxpayer’s timely filed U.S. Return for any taxable year covered by this APA (APA Year) is

filed prior to, or no later than 60 days after, the effective date of this APA, then Taxpayer must

report its taxable income for that APA Year in an amount that is consistent with Appendix A and

all other requirements of this APA either on the original U.S. Return or on an amended U.S.

Return filed no later than 120 days after the effective date of this APA, or through such other

means as may be specified herein.

{Use or edit the following when U.S. Group or Foreign Group contains more

than one member.} [This APA addresses the arm’s-length nature of prices charged or received in

the aggregate between Taxpayer and Foreign Participants with respect to the Covered

Transactions

filed no later than 120 days after the effective date of this APA, or through such other

means as may be specified herein.

{Use or edit the following when U.S. Group or Foreign Group contains more

than one member.} [This APA addresses the arm’s-length nature of prices charged or received in

the aggregate between Taxpayer and Foreign Participants with respect to the Covered

Transactions. Except as explicitly provided, this APA does not address and does not bind the IRS

with respect to prices charged or received, or the relative amounts of income or loss realized, by

particular legal entities that are members of U.S. Group or that are members of Foreign Group.]

For each APA Year, if Taxpayer complies with the terms and conditions of this

APA, then the IRS will not make or propose any allocation or adjustment under I.R.C. section

482 to the amounts charged in the aggregate between Taxpayer and Foreign Participant[s] with

respect to the Covered Transactions.

If Taxpayer does not comply with the terms and conditions of this APA, then the

IRS may:

enforce the terms and conditions of this APA and make or propose

allocations or adjustments under I.R.C. section 482 consistent with this

APA;

ii.

cancel or revoke this APA under section 11.06 of Revenue Procedure

2006-9; or

iii.

revise this APA, if the Parties agree.

Taxpayer must timely file an Annual Report (an original and four copies) for each

APA Year in accordance with Appendix C and section 11.01 of Revenue Procedure 2006-9.

Taxpayer must file the Annual Report for all APA Years through the APA Year ending [insert

year] by [insert date]. Taxpayer must file the Annual Report for each subsequent APA Year by

[insert month and day] immediately following the close of that APA Year

n Annual Report (an original and four copies) for each

APA Year in accordance with Appendix C and section 11.01 of Revenue Procedure 2006-9.

Taxpayer must file the Annual Report for all APA Years through the APA Year ending [insert

year] by [insert date]. Taxpayer must file the Annual Report for each subsequent APA Year by

[insert month and day] immediately following the close of that APA Year. (If any date falls on a

weekend or holiday, the Annual Report shall be due on the next date that is not a weekend or

holiday.) The IRS may request additional information reasonably necessary to clarify or

complete the Annual Report. Taxpayer will provide such requested information within 30 days.

Additional time may be allowed for good cause.

The IRS will determine whether Taxpayer has complied with this APA based on

Taxpayer’s U.S. Returns, the Financial Statements, and other APA Records, for the APA Term

and any other year necessary to verify compliance. For Taxpayer to comply with this APA, {use

the following or an alternative} an independent certified public accountant must render an

opinion that Taxpayer’s Financial Statements present fairly, in all material respects, Taxpayer’s

financial position under U.S. GAAP.

In accordance with section 11.04 of Revenue Procedure 2006-9, Taxpayer will (1)

maintain the APA Records, and (2) make them available to the IRS in connection with an

examination under section 11.03. Compliance with this subparagraph constitutes compliance

with the record-maintenance provisions of I.R.C. sections 6038A and 6038C for the Covered

Transactions for any taxable year during the APA Term.

The True Taxable Income within the meaning of Treasury Regulations sections

1.482-1(a)(1) and (i)(9) of a member of an affiliated group filing a U.S. consolidated return will

be determined under the I.R.C. section 1502 Treasury Regulations.

with the record-maintenance provisions of I.R.C. sections 6038A and 6038C for the Covered

Transactions for any taxable year during the APA Term.

The True Taxable Income within the meaning of Treasury Regulations sections

1.482-1(a)(1) and (i)(9) of a member of an affiliated group filing a U.S. consolidated return will

be determined under the I.R.C. section 1502 Treasury Regulations.

{Optional for US Parent Signatories} To the extent that Taxpayer’s compliance

with this APA depends on certain acts of Foreign Group members, Taxpayer will ensure that

each Foreign Group member will perform such acts.

Critical Assumptions. This APA’s critical assumptions, within the meaning of Revenue

Procedure 2006-9, section 4.05, appear in Appendix B. If any critical assumption has not been

met, then Revenue Procedure 2006-9, section 11.06, governs.

Disclosure. This APA, and any background information related to this APA or the APA

Request, are: (1) considered “return information” under I.R.C. section 6103(b)(2)(C); and (2) not

subject to public inspection as a “written determination” under I.R.C. section 6110(b)(1). Section

521(b) of Pub. L. 106-170 provides that the Secretary of the Treasury must prepare a report for

public disclosure that includes certain specifically designated information concerning all APAs,

including this APA, in a form that does not reveal taxpayers’ identities, trade secrets, and

proprietary or confidential business or financial information.

Disputes. If a dispute arises concerning the interpretation of this APA, the Parties will

seek a resolution by the Director of the Advance Pricing and Mutual Agreement Program, to the

extent reasonably practicable, before seeking alternative remedies.

Materiality. In this APA the terms “material” and “materially” will be interpreted

consistently with the definition of “material facts” in Revenue Procedure 2006-9, section

11.06(4).

10.

Section Captions

he Parties will

seek a resolution by the Director of the Advance Pricing and Mutual Agreement Program, to the

extent reasonably practicable, before seeking alternative remedies.

Materiality. In this APA the terms “material” and “materially” will be interpreted

consistently with the definition of “material facts” in Revenue Procedure 2006-9, section

11.06(4).

10.

Section Captions. This APA’s section captions, which appear in italics, are for

convenience and reference only. The captions do not affect in any way the interpretation or

application of this APA.

11.

Terms and Definitions. Unless otherwise specified, terms in the plural include the

singular and vice versa. Appendix D contains definitions for capitalized terms not elsewhere

defined in this APA.

12.

Entire Agreement and Severability. This APA is the complete statement of the Parties’

agreement. The Parties will sever, delete, or reform any invalid or unenforceable provision in

this APA to approximate the Parties’ intent as nearly as possible.

13.

Successor in Interest. This APA binds, and inures to the benefit of, any successor in

interest to Taxpayer.

14.

Notice. Any notices required by this APA or Revenue Procedure 2006-9 must be in

writing. Taxpayer will send notices to the IRS at the address and in the manner set forth in

Revenue Procedure 2006-9, section 4.11. The IRS will send notices to:

Taxpayer Corporation

Attn: Jane Doe, Sr. Vice President (Taxes)

1000 Any Road

Any City, USA 10000

(phone: _________)

15.

Effective Date and Counterparts. This APA is effective starting on the date, or later date

of the dates, upon which all Parties execute this APA. The Parties may execute this APA in

counterparts, with each counterpart constituting an original.

WITNESS,

The Parties have executed this APA on the dates below.

[Taxpayer Name in all caps]

By:

___________________________

Date: ___________________, 201___

Jane Doe

PA is effective starting on the date, or later date

of the dates, upon which all Parties execute this APA. The Parties may execute this APA in

counterparts, with each counterpart constituting an original.

WITNESS,

The Parties have executed this APA on the dates below.

[Taxpayer Name in all caps]

By:

___________________________

Date: ___________________, 201___

Jane Doe

Sr. Vice President (Taxes)

IRS

By:

___________________________

Date: ___________________, 201___

John M. Wall

Acting Director, Advance Pricing and Mutual Agreement Program

APPENDIX A

COVERED TRANSACTIONS AND TRANSFER PRICING METHOD (TPM)

Covered Transactions.

[Define the Covered Transactions.]

APA Term.

This APA applies to Taxpayer’s taxable years ending __________ through ________

(APA Term).

TPM.

{Note: If appropriate, adapt language from the following examples.}

[The Tested Party is __________.]

• CUP Method

The TPM is the comparable uncontrolled price (CUP) method. The Arm’s Length

Range of the price charged for _________ is between _______ and ___________

per unit.

• CUT Method

The TPM is the CUT Method. The Arm’s Length Range of the royalty charged

for the license of ______is between ____% and ___ % of [Taxpayer’s, Foreign

Participants’, or other specified party’s] Net Sales Revenue. [Insert definition of

net sales revenue or other royalty base.]

• Resale Price Method (RPM)

The TPM is the resale price method (RPM). The Tested Party’s Gross Margin for

any APA Year is defined as follows: the Tested Party’s gross profit divided by its

sales revenue (as those terms are defined in Treasury Regulations sections 1.482-

5(d)(1) and (2)) for that APA Year. The Arm’s Length Range is between ____%

and ___ %, and the Median of the Arm’s Length Range is ___%.

• Cost Plus Method

The TPM is the cost plus method

). The Tested Party’s Gross Margin for

any APA Year is defined as follows: the Tested Party’s gross profit divided by its

sales revenue (as those terms are defined in Treasury Regulations sections 1.482-

5(d)(1) and (2)) for that APA Year. The Arm’s Length Range is between ____%

and ___ %, and the Median of the Arm’s Length Range is ___%.

• Cost Plus Method

The TPM is the cost plus method. The Tested Party’s Cost Plus Markup is defined

as follows for any APA Year: the Tested Party’s ratio of gross profit to production

costs (as those terms are defined in Treasury Regulations sections 1.482-3(d)(1)

and (2)) for that APA Year. The Arm’s Length Range is between ___% and

___%, and the Median of the Arm’s Length Range is ___%.

• CPM with Berry Ratio PLI

The TPM is the comparable profits method (CPM). The profit level indicator is a

Berry Ratio. The Tested Party’s Berry Ratio is defined as follows for any APA

Year: the Tested Party’s gross profit divided by its operating expenses (as those

terms are defined in Treasury Regulations sections 1.482-5(d)(2) and (3)) for that

APA Year. The Arm’s Length Range is between ____ and ___, and the Median of

the Arm’s Length Range is ___.

• CPM using an Operating Margin PLI

The TPM is the comparable profits method (CPM). The profit level indicator is an

operating margin. The Tested Party’s Operating Margin is defined as follows for

any APA Year: the Tested Party’s operating profit divided by its sales revenue (as

those terms are defined in Treasury Regulations section 1.482-5(d)(1) and (4)) for

that APA Year. The Arm’s Length Range is between ____% and ___ %, and the

Median of the Arm’s Length Range is ___%.

• CPM using a Three-year Rolling Average Operating Margin

PLI

The TPM is the comparable profits method (CPM). The profit level indicator is an

operating margin

vided by its sales revenue (as

those terms are defined in Treasury Regulations section 1.482-5(d)(1) and (4)) for

that APA Year. The Arm’s Length Range is between ____% and ___ %, and the

Median of the Arm’s Length Range is ___%.

• CPM using a Three-year Rolling Average Operating Margin

PLI

The TPM is the comparable profits method (CPM). The profit level indicator is an

operating margin. The Tested Party’s Three-Year Rolling Average operating

margin is defined as follows for any APA Year: the sum of the Tested Party’s

operating profit (within the meaning of Treasury Regulation section 1.482-5(d)(4)

for that APA Year and the two preceding years, divided by the sum of its sales

revenue (within the meaning of Treasury Regulation section 1.482-5(d)(1)) for

that APA Year and the two preceding years. The Arm’s Length Range is between

____% and ____%, and the Median of the Arm’s Length Range is ___%.

• Residual Profit Split Method

The TPM is the residual profit split method. [Insert description of routine profit

level determinations and residual profit-split mechanism].

[Insert additional provisions as needed.]

Application of TPM.

For any APA Year, if the results of Taxpayer’s actual transactions produce a [price per unit,

royalty rate for the Covered Transactions] [or] [Gross Margin, Cost Plus Markup, Berry Ratio,

Operating Margin, Three-Year Rolling Average Operating Margin for the Tested Party] within

the Arm’s Length Range, then the amounts reported on Taxpayer’s U.S. Return must clearly

reflect such results.

For any APA year, if the results of Taxpayer’s actual transactions produce a [price per unit,

royalty rate] [or] [Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year

Rolling Average Operating Margin for the Tested Party] outside the Arm’s Length Range, then

amounts reported on Taxpayer’s U.S

amounts reported on Taxpayer’s U.S. Return must clearly

reflect such results.

For any APA year, if the results of Taxpayer’s actual transactions produce a [price per unit,

royalty rate] [or] [Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year

Rolling Average Operating Margin for the Tested Party] outside the Arm’s Length Range, then

amounts reported on Taxpayer’s U.S. Return must clearly reflect an adjustment that brings the

[price per unit, royalty rate] [or] [Tested Party’s Gross Margin, Cost Plus Markup, Berry Ratio,

Operating Margin, Three-Year Rolling Average Operating Margin] to the Median.

For purposes of this Appendix A, the “results of Taxpayer’s actual transactions” means the

results reflected in Taxpayer’s and Tested Party’s books and records as computed under U.S.

GAAP [insert another relevant accounting standard if applicable], with the following

adjustments:

(a) [The fair value of stock-based compensation as disclosed in the Tested Party’s audited

financial statements shall be treated as an operating expense]; and

(b) To the extent that the results in any prior APA Year are relevant (for example, to compute a

multi-year average), such results shall be adjusted to reflect the amount of any adjustment made

for that prior APA Year under this Appendix A.

APA Revenue Procedure Treatment

If Taxpayer makes an adjustment under paragraph 4 of this Appendix A (a “primary

adjustment”), Taxpayer and its related foreign entity may elect APA Revenue Procedure

Treatment in accordance with section 11.02(3) of Revenue Procedure 2006-9 and avoid the

possible adverse tax consequences of a secondary adjustment that would otherwise follow the

primary adjustment.

[Insert additional provisions as needed.]

APPENDIX B

CRITICAL ASSUMPTIONS

This APA’s critical assumptions are:

nd its related foreign entity may elect APA Revenue Procedure

Treatment in accordance with section 11.02(3) of Revenue Procedure 2006-9 and avoid the

possible adverse tax consequences of a secondary adjustment that would otherwise follow the

primary adjustment.

[Insert additional provisions as needed.]

APPENDIX B

CRITICAL ASSUMPTIONS

This APA’s critical assumptions are:

The business activities, functions performed, risks assumed, assets employed, and

financial and tax accounting methods and classifications [and methods of estimation] of

Taxpayer in relation to the Covered Transactions will remain materially the same as described or

used in Taxpayer’s APA Request. A mere change in business results will not be a material

change.

[Insert additional provisions as needed.]

APPENDIX C

APA RECORDS AND ANNUAL REPORT

APA RECORDS

The APA Records will consist of all documents listed below for inclusion in the Annual Report,

as well as all documents, notes, work papers, records, or other writings that support the

information provided in such documents.

ANNUAL REPORT

The Annual Report (and each of the four copies required by paragraph 5(e) of this APA) will

include:

Two copies of a properly completed APA Annual Report Summary in the form of

Appendix E to this APA, one copy of the form bound with, and one copy provided separately

from, the rest of the Annual Report.

A table of contents, organized as follows:

Statements that fully identify, describe, analyze, and explain:

All material differences between the U.S. Group’s business operations (including

functions, risks assumed, markets, contractual terms, economic conditions, property, services,

and assets employed) during the APA Year from the business operations described in the APA

Request. If there have been no material differences, the Annual Report will include a statement

to that effect.

All material differences between the U.S

en the U.S. Group’s business operations (including

functions, risks assumed, markets, contractual terms, economic conditions, property, services,

and assets employed) during the APA Year from the business operations described in the APA

Request. If there have been no material differences, the Annual Report will include a statement

to that effect.

All material differences between the U.S. Group’s accounting methods and

classifications, and methods of estimation used during the APA Year, from those described or

used in the APA Request. If any change was made to conform to changes in U.S. GAAP (or

other relevant accounting standards) Taxpayer will specifically identify the change. If there has

been no material change in accounting methods and classifications or methods of estimation, the

Annual Report will include a statement to that effect.

Any change to the Taxpayer notice information in paragraph 14 of this APA.

Any failure to meet any critical assumption. If there has been no failure, the

Annual Report will include a statement to that effect.

Whether or not material information submitted while the APA Request was

pending is discovered to be false, incorrect, or incomplete.

Any change to any entity classification for federal income tax purposes (including

any change that causes an entity to be disregarded for federal income tax purposes) of any

Worldwide Group member that is a party to the Covered Transactions or is otherwise relevant to

the TPM.

The amount, reason for, and financial analysis of (1) any primary adjustments

made under Appendix A for the APA Year; and (2) any (a) secondary adjustments that follow

such primary adjustments or (b) accounts receivable that Taxpayer establishes, in lieu of

secondary adjustments, by electing APA Revenue Procedure Treatment pursuant to paragraph 5

of Appendix A and Revenue Procedure 2006-9, section 11.02(3), for the APA Year, including

but not limited to:

justments

made under Appendix A for the APA Year; and (2) any (a) secondary adjustments that follow

such primary adjustments or (b) accounts receivable that Taxpayer establishes, in lieu of

secondary adjustments, by electing APA Revenue Procedure Treatment pursuant to paragraph 5

of Appendix A and Revenue Procedure 2006-9, section 11.02(3), for the APA Year, including

but not limited to:

the amounts due or owed, and paid or received by each affected entity;

ii.

the character (such as capital, ordinary, income, expense) and country

source of the funds transferred, and the specific affected line item(s) of

any affected U.S. Return;

iii.

the date(s) and means by which the payments are or will be made; and

iv.

whether or not APA Revenue Procedure Treatment was elected pursuant

to paragraph 5 of Appendix A and Revenue Procedure 2006-9, section

11.02(3).

The amounts, description, reason for, and financial analysis of any book-tax

difference relevant to the TPM for the APA Year, as reflected on Schedule M-1 or Schedule M-3

of the U.S. Return for the APA Year.

Whether Taxpayer contemplates requesting, or has requested, to renew, modify,

or cancel the APA.

The Financial Statements, and any necessary account detail to show compliance with the

TPM, including consolidating financial statements, segmented financial data, records from the

general ledger, or similar information if the assets, liabilities, income, or expenses relevant to

showing compliance with the TPM are a subset of the assets, liabilities, income, or expenses

presented in the Financial Statements.

{Use the following or the alternative prescribed by paragraph 5(f) of this APA:} A copy

of the independent certified public accountant's opinion required by paragraph 5(f) of this APA.

A financial analysis that reflects Taxpayer’s TPM calculations for the APA Year

liance with the TPM are a subset of the assets, liabilities, income, or expenses

presented in the Financial Statements.

{Use the following or the alternative prescribed by paragraph 5(f) of this APA:} A copy

of the independent certified public accountant's opinion required by paragraph 5(f) of this APA.

A financial analysis that reflects Taxpayer’s TPM calculations for the APA Year. The

calculations must reconcile with and reference the information required under item 4 above in

sufficient account detail to allow the IRS to determine whether Taxpayer has complied with the

TPM.

An organizational chart for the Worldwide Group, revised annually to reflect all

ownership or structural changes of entities that are parties to the Covered Transactions or are

otherwise relevant to the TPM.

A copy of the APA and any amendment.

A penalty of perjury statement, executed in accordance with Revenue Procedure 2006-9,

section 11.01(6) and (7).

APPENDIX D

DEFINITIONS

The following definitions control for all purposes of this APA. The definitions appear

alphabetically below:

Term

Definition

Annual Report

A report within the meaning of Revenue Procedure 2006-9, section

11.01.

APA

This Advance Pricing Agreement, which is an “advance pricing

agreement” within the meaning of Revenue Procedure 2006-9, section

2.04.

APA Records

The records specified in Appendix C.

APA Request

Taxpayer’s request for this APA dated _________, including any

amendments or supplemental or additional information thereto.

APA Year

This term is defined in paragraph 5(a) of this APA.

Covered

Transaction(s)

This term is defined in Appendix A.

Financial Statements

Financial statements prepared in accordance with U.S. GAAP and

stated in U.S. dollars.

Foreign Group

Worldwide Group members that are not U.S. persons.

Foreign Participants

[name the foreign entities involved in Covered Transactions].

I.R.C.

The Internal Revenue Code of 1986, 26 U.S.C., as amended.

Pub. L

Covered

Transaction(s)

This term is defined in Appendix A.

Financial Statements

Financial statements prepared in accordance with U.S. GAAP and

stated in U.S. dollars.

Foreign Group

Worldwide Group members that are not U.S. persons.

Foreign Participants

[name the foreign entities involved in Covered Transactions].

I.R.C.

The Internal Revenue Code of 1986, 26 U.S.C., as amended.

Pub. L. 106-170

The Ticket to Work and Work Incentives Improvement Act of 1999.

Revenue Procedure

2006-9

Rev. Proc. 2006-9, 2006-1 C.B. 278.

Transfer Pricing

Method (TPM)

A transfer pricing method within the meaning of Treasury Regulation

section 1.482-1(b) and Revenue Procedure 2006-9, section 2.04.

U.S. GAAP

U.S. generally-accepted accounting principles.

U.S. Group

Worldwide Group members that are U.S. persons.

U.S. Return

For each taxable year, the “returns with respect to income taxes under

subtitle A” that Taxpayer must “make” in accordance with I.R.C.

section 6012. {Or substitute for partnership: For each taxable year,

the “return” that Taxpayer must “make” in accordance with I.R.C.

section 6031.}

Worldwide Group

Taxpayer and all organizations, trades, businesses, entities, or

branches (whether or not incorporated, organized in the United States,

or affiliated) owned or controlled directly or indirectly by the same

interests.

APPENDIX E

APA ANNUAL REPORT SUMMARY FORM

The APA Annual Report Summary on the next page is a required APA Record. The APA

Team Leader supplies some of the information requested on the form. Taxpayer is to supply the

remaining information requested by the form and submit the form as part of its Annual Report.

APA Annual Report

Department of the Treasury--Internal Revenue Service

APA No

NUAL REPORT SUMMARY FORM

The APA Annual Report Summary on the next page is a required APA Record. The APA

Team Leader supplies some of the information requested on the form. Taxpayer is to supply the

remaining information requested by the form and submit the form as part of its Annual Report.

APA Annual Report

Department of the Treasury--Internal Revenue Service

APA No. _______________

SUMMARY

Large Business and International Division

Team Leader

Treaty and Transfer Pricing Operations

Economist

Advance Pricing and Mutual Agreement Program

Intl Examiner

APA Information

Taxpayer Name: ___________________________________________________

Taxpayer EIN:_________________ NAICS:___________________

APA Term: Taxable years ending ________ to ____________

Original APA [ ] Renewal APA [ ]

Annual Report due dates:

_________________, 201__ for all APA Years through APA Year ending in 200__; for each APA Year

thereafter, on _________________ [month and day] immediately following the close of the APA Year

Principal foreign country(ies) involved in covered transaction(s):

Type of APA: [ ] unilateral [ ] bilateral with ________________

Tested party is [ ] US [ ] foreign [ ] both

Approximate dollar volume of covered transactions (on an annual basis) involving tangible goods and services:

[ ] N/A [ ] <$50 million [ ] $50-100 million [ ] $100-250 million [ ] $250-500 million [ ] >$500 million

APA tests on (check all that apply):

[ ] annual basis [ ] multi-year basis [ ] term basis

APA provides (check all that apply) a:

[ ] range [ ] point [ ] floor only [ ] ceiling only [ ] other_____________

APA provides for adjustment (check all that apply) to:

[ ] nearest edge [ ] median [ ] other point

APA Annual Report

APA date executed: ______________, 201__

Information

This APA Annual Report Summary is for APA Year(s) ending in 200__ and was filed on _____________, 201__

(to be completed

[ ] range [ ] point [ ] floor only [ ] ceiling only [ ] other_____________

APA provides for adjustment (check all that apply) to:

[ ] nearest edge [ ] median [ ] other point

APA Annual Report

APA date executed: ______________, 201__

Information

This APA Annual Report Summary is for APA Year(s) ending in 200__ and was filed on _____________, 201__

(to be completed

Check here [ ] if Annual Report was filed after original due date but in accordance with extension.

by the Taxpayer)

Has this APA been amended or changed? [ ] yes [ ] no

Effective Date: ______________________

Has Taxpayer complied with all APA terms and conditions? [ ] yes [ ] no

Were all the critical assumptions met? [ ] yes [ ] no

Has a Primary Compensating Adjustment been made in any APA Year covered by this Annual Report?

[ ] yes [ ] no If yes, which year(s): 200___

Have any necessary Secondary Compensating Adjustments been made? [ ] yes [ ] no

Did Taxpayer elect APA Revenue Procedure treatment? [ ] yes [ ] no

Any change to the entity classification of a party to the APA? [ ] yes [ ] no

Taxpayer notice information contained in the APA remains unchanged. [ ] yes [ ] no

Taxpayer's current US principal place of business: (City, State) _____________________________________

APA Annual Report

Financial analysis reflecting TPM calculations

[ ] yes [ ] no

Checklist of

Financial statements showing compliance with TPM(s)

[ ] yes [ ] no

Key Contents

Schedule M-1 or M-3 book-tax differences

[ ] yes [ ] no

(to be completed

Current organizational chart of relevant portion of world-wide group

[ ] yes [ ] no

by the Taxpayer)

Attach copy of APA

[ ] yes [ ] no

Other APA records and documents included:

Contact

Information

Authorized Representative

Phone Number

Affiliation and Address

APPENDIX 2– MODEL APA (BASED ON REV. PROC

book-tax differences

[ ] yes [ ] no

(to be completed

Current organizational chart of relevant portion of world-wide group

[ ] yes [ ] no

by the Taxpayer)

Attach copy of APA

[ ] yes [ ] no

Other APA records and documents included:

Contact

Information

Authorized Representative

Phone Number

Affiliation and Address

APPENDIX 2– MODEL APA (BASED ON REV. PROC. 2015-41)

TEMPLATE FOR

ADVANCE PRICING AGREEMENT

UNDER REVENUE PROCEDURE 2015-41

_______________

The Advance Pricing and Mutual Agreement Program (“APMA”) of the Internal

Revenue Service (“IRS”) is providing this template for use in drafting advance pricing

agreements (“APAs”) issued under IRS Revenue Procedure 2015-41, 2015-35 I.R.B. 263 (“Rev.

Proc. 2015-41”). This template is designed to systematize how taxpayers propose terms for their

APAs and standardize language used in executed APAs. It will improve efficiency in the APA

process and enhance consistency in the administration of the APA program.

Rev. Proc. 2015-41 requires that taxpayers include as part of a complete APA request a draft

APA and a “redline” comparison of the proposed draft APA against the current model APA. See

section 2.03, exhibit 15, of the Appendix to Rev. Proc. 2015-41. This template serves as the

model APA. A taxpayer is required to produce the “redline” comparison by following the

instructions below to edit this template with tracked changes. The draft APA and “redline”

comparison are then to be included in Word format in the complete APA request. (Before

editing the template with tracked changes, a taxpayer should remove this introduction and the

instructions below from the Microsoft Word file.)

The assigned APMA team will review the APA’s terms proposed in the draft APA

ions below to edit this template with tracked changes. The draft APA and “redline”

comparison are then to be included in Word format in the complete APA request. (Before

editing the template with tracked changes, a taxpayer should remove this introduction and the

instructions below from the Microsoft Word file.)

The assigned APMA team will review the APA’s terms proposed in the draft APA. If the

APMA team accepts the proposed terms in light of its review of the taxpayer’s complete APA

request and other information obtained during the APA process, then the text of the draft APA,

edited as needed to fill in any information not available at the time of the APA Request, will be

adopted as the text of a finally executed APA. If the APMA team does not accept the proposed

terms, it will discuss modifications to the draft APA with the taxpayer during the APA process.

For bilateral and multilateral APAs, the terms of the executed APA will of necessity be

consistent with the terms of the underlying mutual agreement between the United States and one

or more treaty partners.

GENERAL INSTRUCTIONS

The template is designed to minimize editing by using an options-based format for

selecting from terms presented in certain sections of the model APA. The options presented are

those which APMA considers standard and which it has accepted in final APAs. These options

are not binding on APMA, however. APMA reserves the right to modify the option selections,

the specific option language used, or any other terms before executing an APA with the taxpayer.

Options are indicated by square brackets (“[]”). An “x” should be inserted between the

brackets to indicate the selected option (“[x]”). Options that are not selected should not be

deleted, but instead should be left in the text of the draft APA. The options to which APMA and

the taxpayer ultimately agree for the final APA will be indicated by the presence or absence of

an “x”

Options are indicated by square brackets (“[]”). An “x” should be inserted between the

brackets to indicate the selected option (“[x]”). Options that are not selected should not be

deleted, but instead should be left in the text of the draft APA. The options to which APMA and

the taxpayer ultimately agree for the final APA will be indicated by the presence or absence of

an “x”. The term associated with the “x” will be given operative effect in the executed APA.

Certain options are flagged with an asterisk after the square brackets (“[]*”). To facilitate

the APMA team’s subsequent review of the draft APA, the asterisks should not be deleted.

Taxpayers that select flagged options are required to specifically provide justification for the

selection in the APA request. See section 1.02, Part 5, of the Appendix to Rev. Proc. 2015-41.

The template contains placeholder phrases consisting of a hashtag followed by one or

more words in block capital letters (e.g., “#COUNTRY”). Generally, the taxpayer should

replace a placeholder phrase with appropriate text, subject to the following conventions:

• If a placeholder phrase occurs within an option that the taxpayer has rejected, the

taxpayer should change the hashtag to a caret (e.g., change “#COUNTRY” to

“^COUNTRY”) but otherwise leave the phrase intact.15 The caret indicates that

the Taxpayer has rejected this option. For example, for a bilateral APA with

Japan, the lines on the first page just below the title would read:

[x] Bilateral with Japan

[] Multilateral with ^COUNTRIES

[] Unilateral

• The placeholder phrase “#CURRENCY” should be replaced, for example, with

“U.S. dollars,” “Euros,” or “Japanese yen.”

• The placeholder phrase “#DATE” should be replaced with a date in the format of

“December 31, 2020.”

The APA Term will be expressed as dates certain, e.g., “January 1, 2017 to December 31,

2022, inclusive”, rather than as particular tax years

OUNTRIES

[] Unilateral

• The placeholder phrase “#CURRENCY” should be replaced, for example, with

“U.S. dollars,” “Euros,” or “Japanese yen.”

• The placeholder phrase “#DATE” should be replaced with a date in the format of

“December 31, 2020.”

The APA Term will be expressed as dates certain, e.g., “January 1, 2017 to December 31,

2022, inclusive”, rather than as particular tax years.

Taxpayers may need to draft custom text for situations or options not included in the

template. For example, a taxpayer may propose additional critical assumptions to address

specific regulatory contingencies or conditions the taxpayer is expected to face during the term

of the APA. As another example, the provision titled “Limitation on Assistance” at the end of

the Recitals might be modified based on an understanding reached in the prefiling stage of the

APA process. In some cases, a particular critical assumption might facilitate reaching an

agreement on an APA. Taxpayers that include custom text are required to specifically provide

justification for the inclusion in the APA request, just as selecting an option with an asterisk

requires justification. Any custom text must also be evident in the “redline” comparison of the

proposed draft APA.

15 As a result, almost all occurrences of the hashtag in the template will be replaced with a caret or other text in the

taxpayer’s draft APA. The few remaining occurrences of the hashtag will mark a placeholder phrase that cannot yet

be replaced with appropriate text (see, for example, the placeholder phrase in paragraph 6(e) for a date that cannot

be determined until the APA nears execution). Searching the draft APA for the hashtag will locate all placeholder

phrases that still need replacement.

INSTRUCTIONS ON TABLES

The template contains certain tables that the taxpayer should edit

r phrase that cannot yet

be replaced with appropriate text (see, for example, the placeholder phrase in paragraph 6(e) for a date that cannot

be determined until the APA nears execution). Searching the draft APA for the hashtag will locate all placeholder

phrases that still need replacement.

INSTRUCTIONS ON TABLES

The template contains certain tables that the taxpayer should edit. Entries in the tables

will not contain hashtags, but taxpayers nevertheless should fill in the information and add

additional rows to the tables if needed. Taxpayers also should fill in the “APA Information” in

the table in Appendix D, to the extent available or proposed.

INSTRUCTIONS ON APPENDIX A

Appendix A of this template contains the description of the APA’s covered issue(s) and

covered method(s). Taxpayers should note the following points in completing Appendix A:

• The template includes just one covered issue with one corresponding covered

method. If there is more than one covered Issue proposed for the APA, the

taxpayer should add additional covered issues in Appendix A, section 3, with

tracked changes.

• If there is more than one covered method, the taxpayer should first replicate the

template’s entire text for Covered Method 1 in Appendix A, section 4, without

tracked changes, to provide template text for each additional covered method, and

then edit the text for each covered method with tracked changes.

• Normally, each covered issue will have its own corresponding covered method.

However, in some cases, a covered method may apply at once to more than one

covered issue. For example, covered issues may be proposed to be aggregated

and tested by a single covered method. In such cases, the heading for that

covered method could read, for example, “Covered Method for Covered Issues 1-

3”.

• Any interaction between different covered methods should be adequately

explained in the text, and in an appropriate manner

ay apply at once to more than one

covered issue. For example, covered issues may be proposed to be aggregated

and tested by a single covered method. In such cases, the heading for that

covered method could read, for example, “Covered Method for Covered Issues 1-

3”.

• Any interaction between different covered methods should be adequately

explained in the text, and in an appropriate manner. For example, an explanation

might be provided in an introduction at the start of section 4 of Appendix A,

preceding the description of the respective covered methods.

Appendix A uses the term “Tested Party.” When applied in the context of methods that

consider, or test, data from only one party to a transaction, this term is similar in concept to the

term “tested party” as discussed in the OECD Guidelines at paragraphs 3.18 and 3.19, and as

defined in the U.S. Treasury Regulations section 1.482-5(b)(2). However, some methods

consider, or test, data from both parties to a transaction, where there is no singular “tested” party.

Even in applying such methods, however, it is typically the case that one particular party’s

results are formally tested for compliance with the method. For purposes of this template, in

such circumstances, the party whose results are formally tested in applying any particular method

is the “Tested Party”, even if that party is not strictly a “tested party” as discussed in the OECD

Guidelines paragraphs 3.18 and 3.19, or as defined in the U.S. Treasury Regulations section

1.482-5(b)(2).

ADVANCE PRICING AGREEMENT

between

#SIGNATORY

and

THE INTERNAL REVENUE SERVICE

[] Bilateral with #COUNTRY

[] Multilateral with #COUNTRIES

[] Unilateral

Term: #DATE to #DATE, inclusive

[] This APA is commonly referred to as #APA NAME.

PARTIES

The Parties to this APA are the Internal Revenue Service ("IRS") and #NAME OF EACH

NON-IRS SIGNATORY, WITH EIN.

[]

#SIGNATORY will be referred to as “U.S

between

#SIGNATORY

and

THE INTERNAL REVENUE SERVICE

[] Bilateral with #COUNTRY

[] Multilateral with #COUNTRIES

[] Unilateral

Term: #DATE to #DATE, inclusive

[] This APA is commonly referred to as #APA NAME.

PARTIES

The Parties to this APA are the Internal Revenue Service ("IRS") and #NAME OF EACH

NON-IRS SIGNATORY, WITH EIN.

[]

#SIGNATORY will be referred to as “U.S. Taxpayer.”

[]

#SIGNATORY is the common parent of an affiliated group filing consolidated

U.S. tax returns and is entering into this APA on behalf of both itself and the

following members of its consolidated group: #MEMBERS OF GROUP. All

members of this consolidated group will be referred to collectively as “U.S.

Taxpayer.”

RECITALS

[]

This APA is a renewal of one or more prior APAs, which are listed below in

reverse chronological order:

Party(ies)

Execution Date

Term

Key:

• Party(ies): The signatory(ies) to the prior APA, other than the IRS, with

each signatory’s taxpayer identification number;

• Execution Date: The date, or the later of the dates, on which the prior

APA was executed;

• Term: The term of the prior APA.

[]

This is a bilateral APA within the meaning of Rev. Proc. 2015-41 and implements

the terms of a mutual agreement reached between the United States and

#COUNTRY.

[]

This is a multilateral APA within the meaning of Rev. Proc. 2015-41 and

implements the terms of a mutual agreement reached among the United States,

#COUNTRIES.

[]

This APA is a unilateral APA within the meaning of Rev. Proc. 2015-41 and is

not based on any mutual agreement.

The Parties to this APA are defined in the ”Parties” section above. Regarding the

Party(ies) to this APA other than the IRS:

[]

No such Party has an immediate parent or owner that is not a U.S. entity.

[]

One or more such Parties has an immediate parent or owner that is not a U.S

is a unilateral APA within the meaning of Rev. Proc. 2015-41 and is

not based on any mutual agreement.

The Parties to this APA are defined in the ”Parties” section above. Regarding the

Party(ies) to this APA other than the IRS:

[]

No such Party has an immediate parent or owner that is not a U.S. entity.

[]

One or more such Parties has an immediate parent or owner that is not a U.S.

entity, as follows:

Party

Parent’s or Owner’s Identifying

Information

Parent’s or Owner’s

Contact Information

Key:

• Party: Name of the Party having an immediate parent or owner that is not

a U.S. entity;

• Parent’s or Owner’s Identifying Information: Name of the immediate

parent or owner of such Party, and the taxpayer identification number of

that parent or owner for income tax purposes in its country of residence;

• Parent’s or Owner’s Contact Information: The immediate parent’s or

owner’s address and phone number.

The term “Worldwide Group” is defined below in paragraph 12 of this APA. The

ultimate parent entity or owner of Worldwide Group is:

#ENTITY NAME, ADDRESS, AND PHONE

U.S. Taxpayer’s principal place of business is #CITY, #STATE. #BRIEF

DESCRIPTION OF U.S. TAXPAYER AND NON-U.S. TAXPAYER (DEFINED IN SECTION

1 OF APPENDIX A), AND SPECIFICALLY OF EACH COVERED ENTITY (DEFINED IN

SECTION 1 OF APPENDIX A).

This APA contains the Parties’ agreement on the Covered Method(s) for resolving the

Covered Issue(s) under Code section 482 and any other Code sections that are identified in

Appendix A to this APA, the U.S. Treasury Regulations thereunder, and (if applicable):

[]

The income tax convention(s) between the United States and #COUNTRY(IES).

This APA shall not limit the authority of the IRS to (1) verify compliance with this APA

as to the Covered Issue(s), or (2) audit issues other than Covered Issue(s), including issues that

arise under Code section 482 and any other Code sections identified in Appendix A to this APA,

and the U.S

plicable):

[]

The income tax convention(s) between the United States and #COUNTRY(IES).

This APA shall not limit the authority of the IRS to (1) verify compliance with this APA

as to the Covered Issue(s), or (2) audit issues other than Covered Issue(s), including issues that

arise under Code section 482 and any other Code sections identified in Appendix A to this APA,

and the U.S. Treasury Regulations thereunder.

LIMITATION ON ASSISTANCE

The Covered Issue(s) may relate to one or more countries which (i) have an income tax

convention with the United States, but (ii) are not a party to a mutual agreement whose terms are

implemented by this APA. U.S. Taxpayer acknowledges that the IRS may decline to provide

competent authority assistance concerning taxation by such country(ies) that relates to the

Covered Issue(s). See section 2.02(4)(d) of Rev. Proc. 2015-41.

AGREEMENT

The Parties agree as follows:

Covered Entities. This APA’s Covered Entities are defined in Appendix A.

Covered Issue(s). This APA applies to the Covered Issue(s), as defined in Appendix A.

Covered Method(s). Appendix A sets forth the Covered Method(s) for the Covered

Issue(s).

Term. This APA applies to the APA Term, as defined in Appendix A.

Operation.

Rev. Proc. 2015-41 governs the interpretation, legal effect, and administration of

this APA.

The APMA program provides a voluntary process whereby the IRS and taxpayers

may resolve transfer pricing issues and issues for which transfer pricing principles may be

relevant in a principled and cooperative manner on a prospective basis. As such, the APA

process (as defined in Rev. Proc. 2015-41) is an alternative to dispute resolution that benefits

both taxpayers and the IRS and that is intended to promote and encourage open communication.

Accordingly, the IRS and U.S

esolve transfer pricing issues and issues for which transfer pricing principles may be

relevant in a principled and cooperative manner on a prospective basis. As such, the APA

process (as defined in Rev. Proc. 2015-41) is an alternative to dispute resolution that benefits

both taxpayers and the IRS and that is intended to promote and encourage open communication.

Accordingly, the IRS and U.S. Taxpayer agree that neither party will attempt to use nonfactual

oral or written representations, within the meaning of sections 6.04 and 6.05 of IRS Revenue

Procedure 2015-41 (including any proposals to use particular Covered Method(s)), made in

conjunction with the APA Request in any judicial or administrative proceeding. The IRS and

U.S. Taxpayer also agree that factual representations made in conjunction with the APA Request

may be used in judicial and administrative proceedings.

Compliance.

U.S. Taxpayer must report its taxable income in an amount that is consistent with

Appendix A and all other requirements of this APA. U.S. Taxpayer must so report its taxable

income in the following manner:

For any APA Tax Year for which U.S. Taxpayer timely files its original

U.S. return prior to, or no later than 60 days after, the U.S. Effective Date,

U.S. Taxpayer must so report its taxable income for that APA Tax Year in

one of the following ways:

on such original U.S. return;

on an amended U.S. return submitted no later than 120 days after

the U.S. Effective Date;

through a means proposed by U.S. Taxpayer and accepted by the

applicable IRS practice area no later than 120 days after the U.S.

Effective Date (or by such other deadline as is agreed between

U.S. Taxpayer and the applicable IRS practice area); or

if applicable:

[]*

no later than 120 days after the U.S. Effective Date through

the following means: #DESCRIPTION OF MEANS.

ii.

For all other APA Tax Years, U.S

U.S. Taxpayer and accepted by the

applicable IRS practice area no later than 120 days after the U.S.

Effective Date (or by such other deadline as is agreed between

U.S. Taxpayer and the applicable IRS practice area); or

if applicable:

[]*

no later than 120 days after the U.S. Effective Date through

the following means: #DESCRIPTION OF MEANS.

ii.

For all other APA Tax Years, U.S. Taxpayer must so report its taxable

income on its timely filed original U.S. return.

iii.

The provisions of paragraphs 6(a)(i) and 6(a)(ii) are modified by this

paragraph 6(a)(iii). If a Covered Method includes a term test (including

the case of an annual test with a supplemental term test) or a subterm test,

as described in section 4 of Appendix A, then the APA Covered Year as of

which the term test or subterm test applies would change in the event of an

Early Termination. Specifically, while in the absence of an Early

Termination a term test would apply as of the last APA Covered Year, in

the event of an Early Termination the term test would apply as of an

earlier APA Covered Year. Similarly, while in the absence of an Early

Termination a subterm test would apply as of the last APA Covered Year

in the subterm, in the event of an Early Termination the subterm test might

apply as of an earlier APA Covered Year. In these situations, the Early

Termination might not be established in time for U.S. Taxpayer to know to

apply the term test or subterm test as of the earlier APA Covered Year in

reporting taxable income as required under paragraphs 6(a)(i) and 6(a)(ii)

for the APA Tax Year corresponding to that earlier APA Covered Year.

In such cases, U.S. Taxpayer may need to correct its reporting for that

APA Tax Year. Specifically, U.S

rmination might not be established in time for U.S. Taxpayer to know to

apply the term test or subterm test as of the earlier APA Covered Year in

reporting taxable income as required under paragraphs 6(a)(i) and 6(a)(ii)

for the APA Tax Year corresponding to that earlier APA Covered Year.

In such cases, U.S. Taxpayer may need to correct its reporting for that

APA Tax Year. Specifically, U.S. Taxpayer will need to correct its

income reporting for that APA Tax Year if the application of the term test

or subterm test in that earlier APA Covered Year changes the existence or

amount of an APA Primary Adjustment for the Covered Method for that

APA Tax Year. In such cases:

The resulting incorrectness in the prior reporting for that APA Tax

Year is excused; and

U.S. Taxpayer must correct such prior reporting through a means

listed in paragraph 6(a)(i) within 120 days of the Early

Termination being established.

For each Covered Issue, if any, that involves determination of pricing and/or

income allocation16 under Code section 482 (or Code section 367(d)) as modified by any

16 As used in this APA, "income allocation" includes allocation of loss.

applicable income tax convention, this APA addresses the pricing and/or income allocation

between U.S. Taxpayer and Non-U.S. Taxpayer in the aggregate. Except as explicitly provided,

this APA does not address and does not bind the IRS with respect to pricing or income allocation

tion 367(d)) as modified by any

16 As used in this APA, "income allocation" includes allocation of loss.

applicable income tax convention, this APA addresses the pricing and/or income allocation

between U.S. Taxpayer and Non-U.S. Taxpayer in the aggregate. Except as explicitly provided,

this APA does not address and does not bind the IRS with respect to pricing or income allocation

(1) among particular legal entities that are members of U.S. Taxpayer, or (2) among particular

legal entities that are members of Non-U.S. Taxpayer. In addition, this APA does not address

pricing or income allocation between an entity that is not a Covered Entity, and any entity.

For each APA Tax Year, if U.S. Taxpayer complies with the terms and conditions

of this APA, then, provided that this APA remains effective for that APA Tax Year for a

particular Covered Issue, the IRS will not make or propose any allocation or adjustment that is

inconsistent with the application under this APA of the applicable Covered Method to that

Covered Issue.

If U.S. Taxpayer does not comply with the terms and conditions of this APA, then

the IRS may:

enforce the terms and conditions of this APA and make or propose allocations or

adjustments based on the application of the Covered Method(s) to the Covered

Issue(s) as provided in this APA;

ii.

cancel or revoke this APA under section 7.06 of Rev. Proc. 2015-41; or

iii.

revise this APA, if the Parties agree.

U.S. Taxpayer must timely file an Annual Report for each APA Tax Year in

accordance with this paragraph 6(e), Appendix C to this APA, and section 7.02 of Rev. Proc.

2015-41. Annual Reports for multiple APA Tax Years may be combined, provided that all

required information for each APA Tax Year is clearly presented. For each Annual Report, U.S

revise this APA, if the Parties agree.

U.S. Taxpayer must timely file an Annual Report for each APA Tax Year in

accordance with this paragraph 6(e), Appendix C to this APA, and section 7.02 of Rev. Proc.

2015-41. Annual Reports for multiple APA Tax Years may be combined, provided that all

required information for each APA Tax Year is clearly presented. For each Annual Report, U.S.

Taxpayer must submit an original printed version containing a signed original “penalties of

perjury” declaration, one printed copy of the contents of the original printed version, and an

electronic copy of the contents of the original printed version. Any exhibits in the printed

version must be tabbed, and the electronic copy is subject to the same requirements, as to

medium and format, that are specified for APA requests in section 2 of the Appendix to Rev.

Proc. 2015-41. Upon request, U.S. Taxpayer must provide additional copies of the printed

version, at addresses specified by the IRS. U.S. Taxpayer must file the Annual Report for each

APA Tax Year by the later of (i) #DATE CERTAIN, NORMALLY APPROXIMATELY 90

DAYS AFTER THE U.S. EFFECTIVE DATE, and (ii) the fifteenth day of the twelfth month

following the close of the APA Tax Year. The IRS may by notice request additional information

reasonably necessary to clarify or complete the Annual Report. (See paragraph 16, and section

3(c) of Appendix C, regarding notices.) U.S. Taxpayer will provide such requested information

within 30 days from the date of the notice unless a later date is specified in the notice.

Additional time may be allowed for good cause in the discretion of the Director of the Advance

Pricing and Mutual Agreement Program.

The IRS will determine whether U.S. Taxpayer has complied with this APA based

on U.S. Taxpayer’s U.S

ices.) U.S. Taxpayer will provide such requested information

within 30 days from the date of the notice unless a later date is specified in the notice.

Additional time may be allowed for good cause in the discretion of the Director of the Advance

Pricing and Mutual Agreement Program.

The IRS will determine whether U.S. Taxpayer has complied with this APA based

on U.S. Taxpayer’s U.S. returns, the Financial Statements and additional statements required

under this paragraph 6(f), and other APA Records, for all APA Tax Years and any other tax year

necessary to verify compliance. The Financial Statements and additional statements required for

a particular tax year are:

[]

For every U.S. Covered Entity, the Financial Statements together

with the additional statements specified in paragraph 6(f)(i); and

for every Non-U.S. Covered Entity, the Financial Statements

together with the additional statements specified in paragraph

6(f)(ii).

[]*

For every U.S. Covered Entity, the Financial Statements together

with the additional statements specified in paragraph 6(f)(i).

[]*

For every Non-U.S. Covered Entity, the Financial Statements

together with the additional statements specified in paragraph

6(f)(ii).

For each U.S. Covered Entity, the additional statements consist of the

following statement(s):

[]

An audit opinion for that U.S. Covered Entity’s Financial

Statements, as defined in paragraph 6(f)(iii).

[]*

One or more of the following, as indicated:

[]

An accountant’s report for that U.S. Covered Entity’s

Financial Statements, as defined in paragraph 6(f)(iii).

[]

A self-certification for that U.S. Covered Entity’s Financial

Statements, as defined in paragraph 6(f)(iii).

[]

A self-certification for that U.S. Covered Entity’s Financial

Statements, together with a tying certification for that

entity’s Financial Statements, as defined in paragraph

6(f)(iii).

[]

#OTHER MEANS OF VERIFYING THE RELIABILITY

OF THE U.S

ned in paragraph 6(f)(iii).

[]

A self-certification for that U.S. Covered Entity’s Financial

Statements, as defined in paragraph 6(f)(iii).

[]

A self-certification for that U.S. Covered Entity’s Financial

Statements, together with a tying certification for that

entity’s Financial Statements, as defined in paragraph

6(f)(iii).

[]

#OTHER MEANS OF VERIFYING THE RELIABILITY

OF THE U.S. COVERED ENTITY’S FINANCIAL

STATEMENTS.

ii.

For each Non-U.S. Covered Entity, the additional statements consist of the

following statement(s):

[]

An audit opinion for that Non-U.S. Covered Entity’s Financial

Statements, as defined in paragraph 6(f)(iii).

[]*

One or more of the following, as indicated:

[]

An accountant’s report for that Non-U.S. Covered Entity’s

Financial Statements, as defined in paragraph 6(f)(iii).

[]

A self-certification for that Non-U.S. Covered Entity’s

Financial Statements, as defined in paragraph 6(f)(iii).

[]

A self-certification for that Non-U.S. Covered Entity’s

Financial Statements, together with a tying certification for

that Covered Entity’s Financial Statements, as defined in

paragraph 6(f)(iii).

[]

#OTHER MEANS OF VERIFYING THE RELIABILITY

OF THE NON-U.S. COVERED ENTITY’S FINANCIAL

STATEMENTS.

iii.

With reference to the Financial Statements for a particular Covered Entity

for a particular tax year, certain terms used in paragraphs 6(f)(i) and

6(f)(ii) are defined as follows:

An audit opinion is an opinion of an independent certified public

or chartered accountant who audited the Financial Statements.

An accountant’s report is a report of an independent certified

public or chartered accountant who is associated with the Financial

Statements.

A self-certification is an attestation, as defined in paragraph

6(f)(iii)(E), that the Financial Statements have been prepared

according to the Applicable Accounting Standard.

A tying certification consists of the following:

ments.

An accountant’s report is a report of an independent certified

public or chartered accountant who is associated with the Financial

Statements.

A self-certification is an attestation, as defined in paragraph

6(f)(iii)(E), that the Financial Statements have been prepared

according to the Applicable Accounting Standard.

A tying certification consists of the following:

(1)

An attestation, as defined in paragraph 6(f)(iii)(E), that the

Financial Statements can be reconciled to the consolidated

Financial Statements for that entity's direct or indirect

parent according to workpapers provided with the

attestation;

(2)

The workpapers referred to in paragraph 6(f)(iii)(D)(1),

which must demonstrate the consolidation of the Covered

Entity’s Financial Statements into the Financial Statements

of the parent referred to in paragraph 6(f)(iii)(D)(1);

(3)

The Financial Statements of the parent referred to in

paragraph 6(f)(iii)(D)(1); and

(4)

An audit opinion (as defined in paragraph 6(f)(iii)(A)) for

the Financial Statements of the parent referred to in

paragraph 6(f)(iii)(D)(1).

An attestation is an affirmation by an officer of the Covered Entity

in the following form:

I, [Officer’s Name and Title], of [Name of Covered Entity]

affirm under penalties of perjury that the facts stated below

are true. I either have adequate first-hand knowledge to

make this affirmation or have gained adequate knowledge

to make this affirmation through diligent consultation(s)

with one or more individuals who have first-hand

knowledge.

[Facts attested to.]

[Signature]

In accordance with section 7.04 of Rev. Proc. 2015-41, U.S. Taxpayer will (1)

maintain the APA Records, and (2) make them available to the IRS in connection with an

examination under section 7.03 of Rev. Proc. 2015-41

e knowledge

to make this affirmation through diligent consultation(s)

with one or more individuals who have first-hand

knowledge.

[Facts attested to.]

[Signature]

In accordance with section 7.04 of Rev. Proc. 2015-41, U.S. Taxpayer will (1)

maintain the APA Records, and (2) make them available to the IRS in connection with an

examination under section 7.03 of Rev. Proc. 2015-41. Compliance with this subparagraph

constitutes compliance with the record-maintenance provisions of Code sections 6038A and

6038C for the Covered Issue(s) for any APA Covered Year.

The “true taxable income” within the meaning of U.S. Treasury Regulations

sections 1.482-1(a)(1) and (i)(9) of a member of an affiliated group filing a U.S. consolidated

return will be determined under the U.S. Treasury Regulations under Code section 1502.

To the extent that U.S. Taxpayer’s compliance with this APA depends on certain

acts of other members of Worldwide Group, U.S. Taxpayer will ensure that such other members

will perform such acts.

Critical Assumptions. The Critical Assumptions, which are this APA’s critical

assumptions as defined in Rev. Proc. 2015-41, appear in Appendix B. If any Critical

Assumption has not been met, then Rev. Proc. 2015-41, section 7.06, governs, as modified by

Appendix B to this APA.

Disclosure. This APA, and any background information related to this APA or the APA

Request, are: (1) considered “return information” under Code section 6103(b)(2)(C); and (2) not

subject to public inspection as a “written determination” under Code section 6110(b)(1). Section

521(b) of Pub. L. 106-170 provides that the Secretary of the Treasury must prepare a report for

public disclosure that includes certain specifically designated information concerning all APAs,

including this APA, in a form that does not reveal taxpayers’ identities, trade secrets, and

proprietary or confidential business or financial information.

Disputes

e section 6110(b)(1). Section

521(b) of Pub. L. 106-170 provides that the Secretary of the Treasury must prepare a report for

public disclosure that includes certain specifically designated information concerning all APAs,

including this APA, in a form that does not reveal taxpayers’ identities, trade secrets, and

proprietary or confidential business or financial information.

Disputes. If a dispute arises concerning the interpretation or application of this APA, the

Parties will seek a resolution by the Director, Treaty and Transfer Pricing Operations, to the

extent reasonably practicable, before seeking alternative remedies.

10.

Materiality. In this APA the terms “material” and “materially” will be interpreted in a

manner consistent with the description of “material facts” in Rev. Proc. 2015-41, section 7.06(4).

11.

Paragraph Captions. This APA’s paragraph captions, which appear in italic type, are for

convenience and reference only. The captions do not affect in any way the interpretation or

application of this APA.

12.

Terms and Definitions.

Unless otherwise specified, terms in the plural include the singular and vice versa.

Appendix A contains definitions for certain terms used in this APA’s body and

appendices.

Certain terms used in this APA’s body and appendices are defined as follows:

Term

Definition

Annual Report

A report within the meaning of Rev. Proc. 2015-41, section 7.02.

Advance Pricing

Agreement, or

“APA”

An “advance pricing agreement” within the meaning of Rev. Proc. 2015-

41, section 2.02. Unless context indicates otherwise, “this APA” or “the

APA” denotes the particular APA that is executed below.

APA Records

(Defined in Appendix C.)

APA Request

U.S. Taxpayer’s request for this APA, which was dated #DATE, including

any amendments or supplemental or additional information thereto

(including but not limited to any responses to due diligence questions)

2015-

41, section 2.02. Unless context indicates otherwise, “this APA” or “the

APA” denotes the particular APA that is executed below.

APA Records

(Defined in Appendix C.)

APA Request

U.S. Taxpayer’s request for this APA, which was dated #DATE, including

any amendments or supplemental or additional information thereto

(including but not limited to any responses to due diligence questions).

Critical

Assumptions

(Defined in paragraph 7.)

Financial

Statements

Balance sheet, income statement, statement of cash flow, and explanatory

notes, prepared in accordance with the Applicable Accounting Standard as

defined in section 7 of Appendix A.

Non-U.S. Group

In any APA Tax Year, Worldwide Group members that are not U.S.

persons.

Parties

(Defined in the Recitals near the start of this APA.)

Pub. L. 106-170

The Ticket to Work and Work Incentives Improvement Act of 1999.

U.S. Effective

Date

(Defined in paragraph 17 and in section 7 of Appendix A. Those

definitions are intended to have the same meaning. In case of conflict, the

definition in paragraph 17 controls.)

U.S. Group

In any APA Tax Year, Worldwide Group members that are U.S. persons.

Worldwide

Group

In any APA Tax Year, U.S. Taxpayer and all organizations, trades,

businesses, entities, or branches (whether or not incorporated, organized in

the United States, or affiliated) owned or controlled directly or indirectly

by the same interests.

13.

Deadline References. If a deadline under this APA falls on a Saturday, Sunday, or a legal

holiday in the District of Columbia, the deadline is extended to the next succeeding day that is

not a Saturday, Sunday, or legal holiday in the District of Columbia.

14.

Entire Agreement and Severability. This APA is the complete statement of the Parties’

agreement. The Parties will sever, delete, or reform any invalid or unenforceable provision in

this APA to approximate the Parties’ intent as nearly as possible.

15.

Successor in Interest

ine is extended to the next succeeding day that is

not a Saturday, Sunday, or legal holiday in the District of Columbia.

14.

Entire Agreement and Severability. This APA is the complete statement of the Parties’

agreement. The Parties will sever, delete, or reform any invalid or unenforceable provision in

this APA to approximate the Parties’ intent as nearly as possible.

15.

Successor in Interest. This APA binds, and inures to the benefit of, any successor in

interest to U.S. Taxpayer.

16.

Notice. Any notices required by this APA or Rev. Proc. 2015-41 must be in writing.

U.S. Taxpayer will send notices to the IRS at:

Commissioner, Large Business and International Division

Internal Revenue Service

1111 Constitution Avenue, NW

SE:LB:TTPO:APMA:NCA534-01

Washington, DC 20224

(Attention: APMA)

The IRS will send notices to:

#NAME AND ADDRESS

(phone: #PHONE)

The IRS also will send notices to, if applicable:

[]

#REPRESENTATIVE’S NAME AND ADDRESS

(phone: #PHONE)

provided that a valid IRS Form 2848 “Power of Attorney and Declaration of Representative” for

that person was included in the most recent Annual Report (or, if no Annual Report has been

filed, was included in the APA Request).

17.

U.S. Effective Date and Counterparts. This APA is effective starting on the date, or later

date of the dates, upon which all Parties execute this APA ("U.S. Effective Date"). The Parties

may execute this APA in counterparts, with each counterpart constituting an original.

WITNESS,

The Parties have executed this APA on the dates below.

#SIGNATORY NAME IN BOLD FACE BLOCK CAPITAL LETTERS

By:

__________________________Date: _________________, 20____

#NAME

#TITLE

INTERNAL REVENUE SERVICE

By:

__________________________Date: _________________, 20____

John M

xecute this APA in counterparts, with each counterpart constituting an original.

WITNESS,

The Parties have executed this APA on the dates below.

#SIGNATORY NAME IN BOLD FACE BLOCK CAPITAL LETTERS

By:

__________________________Date: _________________, 20____

#NAME

#TITLE

INTERNAL REVENUE SERVICE

By:

__________________________Date: _________________, 20____

John M. Wall

Acting Director, Advance Pricing and Mutual Agreement Program

APPENDIX A

COVERED ENTITIES, TERM, COVERED ISSUE(S), COVERED METHOD(S),

INCOME REPORTING,

CONFORMING ADJUSTMENTS AND REPATRITION OF FUNDS,

CERTAIN SUBSEQUENT ADJUSTMENTS,

AND DEFINITIONS

Section 1 of this Appendix lists the Covered Entities. Section 2 defines the APA Term,

APA Tax Years, and APA Covered Years. Section 3 describes the Covered Issue(s). Section 4

describes the Covered Method applicable to each Covered Issue.

Section 5 describes the application of the Covered Method(s) to income reporting and the

possible need for an APA Primary Adjustment under one or more Covered Methods. Section 6

addresses conforming adjustments and repatriation of funds following APA Primary

Adjustments.

Section 7 provides definitions that apply both to this Appendix and to the APA as a

whole. The definitions table is based on a standard, inclusive model, and thus may include terms

not used in this APA.

Covered Entities

The U.S. Covered Entity(ies) are:

#LIST OF EACH U.S. ENTITY INVOLVED IN ONE OR MORE COVERED

ISSUE(S), AND ALSO (LISTED FIRST) ANY CONSOLIDATED RETURN

PARENT FOR ANY SUCH ENTITY. FOR EACH ENTITY, NAME,

ADDRESS, PHONE, AND EIN.

The term “U.S. Taxpayer” includes collectively all U.S. Covered Entities and any other entities

that are in a consolidated return group with a U.S. Covered Entity.

The Non-U.S. Covered Entity(ies) are:

# LIST OF EACH NON-U.S. ENTITY INVOLVED IN ONE OR MORE

COVERED ISSUE(S), AND ALSO (LISTED FIRST) ANY COMMON TAX

REPORTING PARENT FOR ANY SUCH ENTITY

TY, NAME,

ADDRESS, PHONE, AND EIN.

The term “U.S. Taxpayer” includes collectively all U.S. Covered Entities and any other entities

that are in a consolidated return group with a U.S. Covered Entity.

The Non-U.S. Covered Entity(ies) are:

# LIST OF EACH NON-U.S. ENTITY INVOLVED IN ONE OR MORE

COVERED ISSUE(S), AND ALSO (LISTED FIRST) ANY COMMON TAX

REPORTING PARENT FOR ANY SUCH ENTITY. FOR EACH ENTITY,

NAME, ADDRESS, AND PHONE.

The term “Non-U.S. Taxpayer” includes collectively all Non-U.S. Covered Entities and any

other entities that are in a common tax reporting group with a Non-U.S. Covered Entity.

The term “Covered Entities” includes both the U.S. Covered Entities and the Non-U.S.

Covered Entities.

APA Term, APA Tax Years, and APA Covered Years

The APA applies to the period from #DATE to #DATE, inclusive (the “APA Term”).

[]

The APA Term does not include a Rollback.

[]

The APA Term includes a Rollback, which covers from #DATE to #DATE,

inclusive (the “Rollback Period”).

A tax year of U.S. Taxpayer that is wholly or partly contained in the APA Term is called

an “APA Tax Year.” For a particular APA Tax Year, the portion of such APA Tax Year that is

contained in the APA Term is called an “APA Covered Year.” Such APA Tax Year and APA

Covered Year are said to “correspond” to each other or to be “corresponding.”

Covered Issue(s)

The Covered Issue(s) are as described below.

Covered Issue 1:

#DESCRIPTION OF COVERED ISSUE.

Covered Method(s)

Each Covered Method applies to one or more Covered Issues. A Covered Method and

the Covered Issue(s) to which the Covered Method applies are said to “correspond,” or to be

“corresponding”.

The Covered Methods are summarized in the following table and are described in detail

below. In case of conflict with this table, the detailed descriptions of the Covered Methods

below, and the descriptions in section 3 above of the Covered Issues, control

s. A Covered Method and

the Covered Issue(s) to which the Covered Method applies are said to “correspond,” or to be

“corresponding”.

The Covered Methods are summarized in the following table and are described in detail

below. In case of conflict with this table, the detailed descriptions of the Covered Methods

below, and the descriptions in section 3 above of the Covered Issues, control.

Covered

Method

Number

Applies to

Covered

Issues

Number(s)

Summary

Description of

Corresponding

Covered Issues

Type of Method;

Results Tested

Point or

Range

Testing

Frequency

and Periods

This Appendix A uses the term “Tested Party.” When applied in the context of methods

that consider, or test, data from only one party to a transaction, this term is similar in concept to

the term “tested party” as discussed in the OECD Guidelines paragraphs 3.18 and 3.19, and as

defined in the U.S. Treasury Regulations section 1.482-5(b)(2). However, some methods

consider, or test, data from both parties to a transaction, where there is no singular “tested” party.

Even in applying such methods, however, it is typically the case that one particular party’s

results are formally tested for compliance with the method. For purposes of this template, in

such circumstances, the party whose results are formally tested in applying any particular method

is the “Tested Party”, even if that party is not strictly a “tested party” as discussed in the OECD

Guidelines paragraphs 3.18 and 3.19, or as defined in the U.S. Treasury Regulations section

1.482-5(b)(2).

Covered Method for Covered Issue 1:

Tested Party

The Tested Party is #TESTED PARTY.

Financial Results Tested (Type of Method)

[]

The Covered Method is an implementation of the comparable uncontrolled price

method under the OECD Guidelines and of the comparable uncontrolled price

method under the U.S. Treasury Regulations

Treasury Regulations section

1.482-5(b)(2).

Covered Method for Covered Issue 1:

Tested Party

The Tested Party is #TESTED PARTY.

Financial Results Tested (Type of Method)

[]

The Covered Method is an implementation of the comparable uncontrolled price

method under the OECD Guidelines and of the comparable uncontrolled price

method under the U.S. Treasury Regulations. The Tested Party’s financial results

to be tested are:

[]

per unit price paid, defined as the total amount paid for #DESCRIPTION

OF GOODS divided by the number of #DESCRIPTION OF A UNIT OF

GOODS purchased.

[]

per unit price received, defined as the total amount received for

#DESCRIPTION OF GOODS divided by the number of #DESCRIPTION

OF A UNIT OF GOODS sold.

[]

The Covered Method is an implementation of the comparable uncontrolled price

method under the OECD Guidelines and of the comparable uncontrolled services

price method under the U.S. Treasury Regulations. The Tested Party’s financial

results to be tested are:

[]

per unit price paid, defined as the total amount paid for #DESCRIPTION

OF SERVICES divided by the number of #DESCRIPTION OF A UNIT

OF SERVICES received.

[]

per unit price received, defined as the total amount received for

#DESCRIPTION OF SERVICES divided by the number of

#DESCRIPTION OF A UNIT OF SERVICES provided.

[]

The Covered Method is an implementation of the comparable uncontrolled price

method under the OECD Guidelines and of the comparable uncontrolled

transaction method under the U.S. Treasury Regulations. The Tested Party’s

financial results to be tested are the royalty paid for the license of

#DESCRIPTION OF LICENSED INTANGIBLE PROPERTY divided by the

Tested Party’s:

[]

sales revenue from sales of #DESCRIPTION OF GOODS/SERVICES.

[]

#OTHER ROYALTY BASE.

[]

The Covered Method is an implementation of the comparable uncontrolled price

method under the OECD Guidelines and of the acquisition price method under the

U.S

be tested are the royalty paid for the license of

#DESCRIPTION OF LICENSED INTANGIBLE PROPERTY divided by the

Tested Party’s:

[]

sales revenue from sales of #DESCRIPTION OF GOODS/SERVICES.

[]

#OTHER ROYALTY BASE.

[]

The Covered Method is an implementation of the comparable uncontrolled price

method under the OECD Guidelines and of the acquisition price method under the

U.S. Treasury Regulations. The Tested Party’s financial results to be tested are

described in subsection (c) below.

[]

The Covered Method is an implementation of the comparable uncontrolled price

method under the OECD Guidelines and of the market capitalization method

under the U.S. Treasury Regulations. The Tested Party’s financial results to be

tested are described in subsection (c) below.

[]

The Covered Method is an implementation of the resale price method under the

OECD Guidelines and of the resale price method under the U.S. Treasury

Regulations. The Tested Party’s financial results to be tested are the gross profit

margin from the sale of #DESCRIPTION OF GOODS.

[]

The Covered Method is an implementation of the resale price method under the

OECD Guidelines and of the gross services margin method under the U.S.

Treasury Regulations. The Tested Party’s financial results to be tested are the

gross services margin from the provision of #DESCRIPTION OF SERVICES.

[]

The Covered Method is an implementation of the cost plus method under the

OECD Guidelines and of the cost plus method under the U.S. Treasury

Regulations. The Tested Party’s financial results to be tested are the gross profit

markup.

[]

The Covered Method is an implementation of the cost plus method under the

OECD Guidelines and of the cost of services plus method under the U.S. Treasury

Regulations. The Tested Party’s financial results to be tested are the gross

services profit markup from the provision of #DESCRIPTION OF SERVICES

ations. The Tested Party’s financial results to be tested are the gross profit

markup.

[]

The Covered Method is an implementation of the cost plus method under the

OECD Guidelines and of the cost of services plus method under the U.S. Treasury

Regulations. The Tested Party’s financial results to be tested are the gross

services profit markup from the provision of #DESCRIPTION OF SERVICES.

[]

The Covered Method is based on the principles of the low value-adding intra-

group services approach under the OECD Guidelines and of the services cost

method under the U.S. Treasury Regulations. The Tested Party’s financial results

to be tested are the markup on total costs for providing #DESCRIPTION OF

SERVICES.

[]

The Covered Method is an implementation of the transactional net margin method

under the OECD Guidelines and of the comparable profits method under the U.S.

Treasury Regulations. The Tested Party’s financial results to be tested, as

reflected in its net profit indicator (per OECD Guidelines) or profit level indicator

(per U.S. Treasury Regulations), are its:

[]

operating margin.

[]

markup on total costs.

[]

Berry ratio.

[]

return on operating assets.

[]

return on invested capital.

[]*

#OTHER NET PROFIT INDICATOR OR PROFIT LEVEL

INDICATOR, WITH DEFINITION.

[]

The Covered Method is an implementation of the profit split (residual analysis)

method under the OECD Guidelines and of the residual profit split method under

the U.S. Treasury Regulations. The Tested Party’s financial results to be tested

are described in subsection (c) below.

[]

The Covered Method is an implementation of the profit split (contribution

analysis) method under the OECD Guidelines and of the comparable profit split

method under the U.S. Treasury Regulations. The Tested Party’s financial results

to be tested are described in subsection (c) below

y Regulations. The Tested Party’s financial results to be tested

are described in subsection (c) below.

[]

The Covered Method is an implementation of the profit split (contribution

analysis) method under the OECD Guidelines and of the comparable profit split

method under the U.S. Treasury Regulations. The Tested Party’s financial results

to be tested are described in subsection (c) below.

[]

The Covered Method is an implementation of an income based valuation

technique as referenced in paragraph 6.153 of the OECD Guidelines and of the

income method under the U.S. Treasury Regulations. The Tested Party’s

financial results to be tested are described in subsection (c) below.

[]

The Covered Method is an implementation of (i) a sharing of the cost of current

contributions in proportion to overall expected benefits, within a cost contribution

arrangement under the OECD Guidelines, and (ii) a sharing of intangible

development costs in proportion to reasonably anticipated benefits, within a cost

sharing arrangement under the U.S. Treasury Regulations. The Tested Party’s

financial results to be tested are described in subsection (c) below.

[]

The Covered Method is a method that is not specified under the OECD

Guidelines and not specified under the U.S. Treasury Regulations. The Tested

Party’s financial results to be tested are described in subsection (c) below.

Such financial results are determined according to the Applicable Accounting Standard,

with the proviso that in determining such results, accounting principles and conventions that are

generally accepted in the trade or industry must be used.

Such financial results are tested against a point or range as described below. The test is

carried out with a frequency, and for certain time periods, as described below. If and when these

financial results do not satisfy the test, they must be adjusted as described in section 5 of this

Appendix A.

ventions that are

generally accepted in the trade or industry must be used.

Such financial results are tested against a point or range as described below. The test is

carried out with a frequency, and for certain time periods, as described below. If and when these

financial results do not satisfy the test, they must be adjusted as described in section 5 of this

Appendix A.

Testing of Financial Results Against a Point or Range

The Tested Party’s financial results are tested as follows:

[]

The financial results must equal #X.

[]

The financial results must be within an Arm’s Length Range.

[]

The Arm’s Length Range is from #X to #Y inclusive.

[]

This Arm’s Length Range has an associated Median value of #Z.

[]

This Arm’s Length Range has no associated Median value.

[]

Two Arm’s Length Ranges apply. The first is from #W to #X inclusive

and applies to the annual test described in subsection (d) below. The

second is from #Y to #Z inclusive and applies to the term test described in

subsection (d) below.

[]

The first Arm’s Length Range has an associated Median value of

#P, and the second Arm’s Length Range has an associated Median

value of #Q.

[]

These Arm’s Length Ranges have no associated Median value.

[]

Two Arm’s Length Ranges apply. The first is from #W to #X inclusive

and applies to the subterm test described in subsection (d) below. The

second is from #Y to #Z inclusive and applies to the annual test described

in subsection (d) below.

[]

The first Arm’s Length Range has an associated Median value of

#P, and the second Arm’s Length Range has an associated Median

value of #Q.

[]

These Arm’s Length Ranges have no associated Median value.

[]

Two Arm’s Length Ranges apply. The first is from #W to #X inclusive

and applies to the test for the first subterm described in subsection (d)

below. The second is from #Y to #Z inclusive and applies to the test for

the second subterm described in subsection (d) below

’s Length Range has an associated Median

value of #Q.

[]

These Arm’s Length Ranges have no associated Median value.

[]

Two Arm’s Length Ranges apply. The first is from #W to #X inclusive

and applies to the test for the first subterm described in subsection (d)

below. The second is from #Y to #Z inclusive and applies to the test for

the second subterm described in subsection (d) below.

[]

The first Arm’s Length Range has an associated Median value of

#P, and the second Arm’s Length Range has an associated Median

value of #Q.

[]

These Arm’s Length Ranges have no associated Median value.

[]

#OTHER DESCRIPTION, FOR EXAMPLE THE EVALUATION AND

TESTING MECHANICS FOR A PROFIT SPLIT, AN INCOME METHOD, AN

UNSPECIFIED METHOD, OR A SHARING OF COSTS UNDER A COST

CONTRIBUTION ARRANGMENT/COST SHARING ARRANGEMENT.

Testing Frequency and Testing Periods

The Tested Party’s financial results are tested as of certain APA Covered Years, and for

certain time periods, as follows:

[]

The results are tested annually, meaning that they are tested as of each APA

Covered Year, for a period consisting of that APA Covered Year.

[]

There is no additional term test.

[]

There is an additional term test. For this test, the results are tested as of

the Last Effective APA Covered Year, for the period consisting of the Last

Effective APA Covered Year and all prior APA Covered Years.

The application of the annual test and the application of the additional

term test are coordinated as described in section 5 of this Appendix A.

[]*

The results are tested on a term basis, meaning that they are tested only once, as

of the Last Effective APA Covered Year, for a period consisting of the Last

Effective APA Covered Year and all prior APA Covered Years.

[]*

The results are tested on the basis of two subterms. For this purpose, the APA

Term is divided into two subterms

ed as described in section 5 of this Appendix A.

[]*

The results are tested on a term basis, meaning that they are tested only once, as

of the Last Effective APA Covered Year, for a period consisting of the Last

Effective APA Covered Year and all prior APA Covered Years.

[]*

The results are tested on the basis of two subterms. For this purpose, the APA

Term is divided into two subterms. The first subterm consists of all APA

Covered Years ending on or before #DATE, and the second subterm consists of

all other APA Covered Years. For each subterm, the results are tested as of the

Last Effective APA Subterm Covered Year, for a period consisting of the Last

Effective APA Subterm Covered Year and all prior APA Covered Years in the

subterm.

[]*

The results are tested on a subterm basis for all APA Covered Years ending on or

before #DATE (the “subterm”), and are tested annually for each other APA

Covered Year, as follows:

The results are tested as of the Last Effective APA Subterm Covered Year,

for a period consisting of the Last Effective APA Subterm Covered Year

and all prior APA Covered Years in the subterm.

The results are tested as of each APA Covered Year that is not in the

subterm, for a period consisting of that APA Covered Year.

[]*

The results are tested on a cumulative basis, meaning that (except as provided in

the following sentence) they are not tested as of the first APA Covered Year but

they are tested as of each other particular APA Covered Year for a period

consisting of such particular APA Covered Year and all prior APA Covered

Years. However, if the Last Effective APA Covered Year is the first APA

Covered Year, then the results are tested as of the first APA Covered Year, for a

period consisting of such APA Covered Year

re not tested as of the first APA Covered Year but

they are tested as of each other particular APA Covered Year for a period

consisting of such particular APA Covered Year and all prior APA Covered

Years. However, if the Last Effective APA Covered Year is the first APA

Covered Year, then the results are tested as of the first APA Covered Year, for a

period consisting of such APA Covered Year.

[]*

The results are tested on a three-year rolling average basis, meaning that the

results are tested as of each APA Covered Year, for a period consisting of the

APA Tax Year corresponding to the APA Covered Year (but excluding any

portion of that APA Tax Year that is after the APA Term), and the Tested Party’s

two preceding tax years.

Other Provisions

The Tested Party’s financial results, to be tested as described above, are for:

[]

The Tested Party as a whole.

[]

Only a segment of the Tested Party’s activity. #DETAILED DESCRIPTION OF

THE SEGMENT AND OF THE ALLOCATION AND APPORTIONMENT

METHODS USED, INCLUDING ANY APPLICABLE FORMULAS AND

DEFINITIONS OF QUANTITIES USED IN THOSE FORMULAS. THIS

DESCRIPTION SHOULD BE DETAILED ENOUGH TO ENABLE A

STRAIGHTFORWARD VERIFICATION OF COMPLIANCE BY THE IRS

EXAMINATION TEAM.

When the Tested Party’s financial results are tested as of a given APA Covered Year,

those results shall reflect, to the extent relevant, any APA Primary Adjustment for this Covered

Method made under section 5 of this Appendix A for the APA Tax Year corresponding to any

prior APA Covered Year.

For this Covered Method, if applicable:

[]*

For APA Covered Years ending on or before #DATE, it is agreed that this

Covered Method, yields financial results as shown below, and that any APA

Primary Adjustments under section 5 of this Appendix A are as shown below.

#TEXT AND/OR TABLES SHOWING THE FINANCIAL RESULTS, THE

TESTING OF THOSE FINANCIAL RESULTS UNDER THE COVERED

METHOD, AND ANY RESULTING APA PRIMARY ADJUSTMENTS

[]*

For APA Covered Years ending on or before #DATE, it is agreed that this

Covered Method, yields financial results as shown below, and that any APA

Primary Adjustments under section 5 of this Appendix A are as shown below.

#TEXT AND/OR TABLES SHOWING THE FINANCIAL RESULTS, THE

TESTING OF THOSE FINANCIAL RESULTS UNDER THE COVERED

METHOD, AND ANY RESULTING APA PRIMARY ADJUSTMENTS.

For this Covered Method, if applicable:

[]

This Covered Method addresses the pricing for a transfer of intangible property

(which does not constitute a platform contribution transaction as defined in U.S.

Treasury Regulations section 1.482-7(b)(1)(ii)) within the meaning of U.S.

Treasury Regulations section 1.482-4. That pricing will not be subject to periodic

adjustments by the IRS, during or after the APA Term, under U.S. Treasury

Regulations section 1.482-4(f)(2) or (6).

[]

This Covered Method addresses the pricing for a platform contribution transaction

(“PCT”). That PCT will not be treated as a Trigger PCT within the meaning of

U.S. Treasury Regulations section 1.482-7(i)(6)(i) for purposes of making

periodic adjustments, during or after the APA Term, under U.S. Treasury

Regulations section 1.482-7(i)(6).

Application of Covered Method(s) to Income Reporting

For each APA Tax Year, and for each Covered Method and corresponding Covered

Issue(s), the amounts reported by U.S. Taxpayer and Non-U.S. Taxpayer for income tax

purposes under the laws of the United States and #COUNTRY(IES) must clearly reflect the

Tested Party’s actual transactions, allocations, and/or recordkeeping, as applicable, that relate to

such Covered Issue(s), adjusted as necessary to conform with section 4 of this Appendix A.

Accordingly, for each particular APA Tax Year and corresponding APA Covered Year, and for

each such Covered Method:

ses under the laws of the United States and #COUNTRY(IES) must clearly reflect the

Tested Party’s actual transactions, allocations, and/or recordkeeping, as applicable, that relate to

such Covered Issue(s), adjusted as necessary to conform with section 4 of this Appendix A.

Accordingly, for each particular APA Tax Year and corresponding APA Covered Year, and for

each such Covered Method:

If the Tested Party’s financial results are tested as of such APA Covered Year and

do not conform with section 4 of this Appendix A, then the tax reporting for such

APA Tax Year must clearly reflect an adjustment that brings such results into

conformance (an “APA Primary Adjustment”). If section 4 of this Appendix A

specifies conformance to an Arm's Length Range, then the adjustment shall be to:

[]

the Median.

[]*

the near edge of the Arm’s Length Range.

[]*

the Median for Covered Issues #SPECIFY WHICH ONES, and the near

edge of the Arm’s Length Range for Covered Issues #SPECIFY WHICH

ONES.

ii.

If an adjustment is not required under paragraph (i) above, then the tax reporting

must clearly reflect the Tested Party’s financial results, with no adjustment. In

this case there is no APA Primary Adjustment.

iii.

If both an annual test and an additional term test apply under such Covered

Method, and such APA Covered Year is the Last Effective APA Covered Year, so

that as of such APA Covered Year the Tested Party’s financial results are tested

under both the annual test and the term test, then paragraphs (i) and (ii) above are

modified by this paragraph (iii), which coordinates the application of both tests.

As explained in more detail below, the annual test is applied first, followed by the

term test. Specifically, the need for and amount of any APA Primary Adjustment

for such APA Covered Year will be determined as follows:

First apply paragraphs (i) and (ii) above under the assumption that only the

annual test applies

his paragraph (iii), which coordinates the application of both tests.

As explained in more detail below, the annual test is applied first, followed by the

term test. Specifically, the need for and amount of any APA Primary Adjustment

for such APA Covered Year will be determined as follows:

First apply paragraphs (i) and (ii) above under the assumption that only the

annual test applies. Any required adjustment will be referred to as the

“annual adjustment” rather than an “APA Primary Adjustment.” If there

is no required adjustment, the annual adjustment is considered to be zero.

Next, apply paragraphs (i) and (ii) above to the Tested Party’s financial

results as adjusted by any nonzero annual adjustment, under the

assumption that only the term test applies to those results. Any required

adjustment under this application of paragraphs (i) and (ii) will be referred

to as the “term adjustment” rather than an “APA Primary Adjustment.” If

there is no such required adjustment, the term adjustment is considered to

be zero.

Add the annual adjustment and term adjustment, taking account of the

magnitude and (if nonzero) direction of each. If this sum is zero, there is

no APA Primary Adjustment for such APA Covered Year. If this sum is

nonzero, this sum gives the magnitude and direction of the APA Primary

Adjustment for such APA Covered Year. Any APA Primary Adjustment,

or the lack of an APA Primary Adjustment, must be clearly reflected in the

tax reporting for such APA Tax Year (see paragraphs (i) and (ii) above).

iv.

If this APA is unilateral and such APA Covered Year is within the Rollback

Period, then:

[]

Paragraphs (i)-(iii) above notwithstanding, an APA Primary Adjustment

will not be made if that APA Primary Adjustment would decrease the

income of U.S. Taxpayer for such APA Tax Year.

[]*

Paragraphs (i)-(iii) above apply without modification

A Tax Year (see paragraphs (i) and (ii) above).

iv.

If this APA is unilateral and such APA Covered Year is within the Rollback

Period, then:

[]

Paragraphs (i)-(iii) above notwithstanding, an APA Primary Adjustment

will not be made if that APA Primary Adjustment would decrease the

income of U.S. Taxpayer for such APA Tax Year.

[]*

Paragraphs (i)-(iii) above apply without modification.

If indicated, the above provisions on APA Primary Adjustments are modified as follows:

[]*

Any APA Primary Adjustment that would be made under the above provisions for

an APA Tax Year ending before #DATE will instead be made for the APA Tax

Year ending #THE SAME DATE (the “Telescoping Year”). For each particular

Covered Method, all APA Primary Adjustments that are made for the Telescoping

Year (including any APA Primary Adjustments that are moved to the Telescoping

Year as just described, as well as any APA Primary Adjustment originally made

for the Telescoping Year) are netted.

[]

The foregoing provision applies without modification.

[]

The foregoing provision applies with the following modification. An

APA Primary Adjustment that is thus moved from a particular APA Tax

Year (the “Original Year”) to the Telescoping Year shall be increased in

amount to reflect the time value of money. That increase will consist of

multiplication by a factor that is an annual rate raised to a power. The

annual rate is 1.#XY. The power is the quotient of (i) the average of the

number of months by which the end of the Telescoping Year is later than

the end of the Original Year, and the number of months by which the start

of the Telescoping Year is later than the start of the Original Year (with

any fractions of months rounded to whole months), (ii) divided by twelve.

For U.S. tax purposes, the generally applicable Code rules will apply with respect to APA

Primary Adjustments, except as otherwise provided in Rev. Proc. 2015-41 or in this APA.

Original Year, and the number of months by which the start

of the Telescoping Year is later than the start of the Original Year (with

any fractions of months rounded to whole months), (ii) divided by twelve.

For U.S. tax purposes, the generally applicable Code rules will apply with respect to APA

Primary Adjustments, except as otherwise provided in Rev. Proc. 2015-41 or in this APA.

Conforming Adjustments and Repatriation of Funds

The provisions in this section 6 apply to “Repatriable Issues,” which are Covered Issues

that concern transactions between associated enterprises that fall under Article 9 of the OECD

Model Tax Convention. Such transactions correspond to transactions that under U.S. law are

subject to application of Code section 482, as modified by any applicable treaty provision.

If the application of a Covered Method to a Repatriable Issue requires an APA Primary

Adjustment under section 5 of this Appendix A for a given APA Tax Year, then for U.S. tax

purposes there generally must be a corresponding conforming adjustment as specified in U.S.

Treasury Regulations section 1.482-1(g)(3) as amplified by Rev. Proc. 99-32 or any successor

revenue procedure. However, for this purpose, all APA Primary Adjustments for such APA Tax

Year arising from the application of a Covered Method to a Repatriable Issue are first netted to

yield a net APA Primary Adjustment for such APA Tax Year. Only if the net APA Primary

Adjustment is nonzero is a conforming adjustment required.

For each APA Tax Year with a nonzero net APA Primary Adjustment, for U.S. tax

purposes the conforming adjustment will be accomplished in the following steps:

The conforming adjustment will be accomplished between #U.S. ENTITY and

#NON-U.S. ENTITY, which will be referred to here as “U.S. Entity” and “Non-

U.S. Entity”, respectively. An intercompany payable will be established between

U.S. Entity and Non-U.S

nonzero net APA Primary Adjustment, for U.S. tax

purposes the conforming adjustment will be accomplished in the following steps:

The conforming adjustment will be accomplished between #U.S. ENTITY and

#NON-U.S. ENTITY, which will be referred to here as “U.S. Entity” and “Non-

U.S. Entity”, respectively. An intercompany payable will be established between

U.S. Entity and Non-U.S. Entity in the amount and direction of the net APA

Primary Adjustment, as of the last day of such APA Tax Year. This payable will

be denominated in #CURRENCY. The payable will be treated as indebtedness

for all U.S. federal tax purposes; provided, however, that the payable will not be

treated as indebtedness for purposes of Code section 956 if the payable is satisfied

within 90 days of the close of the APA Tax Year with respect to which it is

established.

ii.

[]

The intercompany payable will bear interest at an arm’s length rate.

[]

Such arm’s length rate is not specified in this APA and will be

determined under applicable legal principles.

[]

Such arm’s length rate is determined as follows. #DESCRIPTION

OF ARM’S LENGTH RATE (FOR EXAMPLE, FOR A U.S.

DOLLAR PAYABLE, A CERTAIN APPLICABLE FEDERAL

RATE UNDER U.S. TREASURY REGULATIONS SECTION

1.482-2(a)(2)(iii)(C)).

[]

This APA is bilateral or multilateral. As agreed between the United States

and #COUNTRY(IES), the intercompany payable will not bear interest.

iii.

The intercompany payable must be satisfied, in a manner permitted under Rev.

Proc. 99-32 or any successor revenue procedure, within 90 days of the later of (1)

the date for timely filing (with extensions) of the U.S. return for such APA Tax

Year, and (2) the APA’s U.S. Effective Date. If any amount of the intercompany

payable is not otherwise so satisfied within that 90-day period, such amount, on

the last day of such period, will be deemed (1) to be paid between U.S. Entity and

Non-U.S

uccessor revenue procedure, within 90 days of the later of (1)

the date for timely filing (with extensions) of the U.S. return for such APA Tax

Year, and (2) the APA’s U.S. Effective Date. If any amount of the intercompany

payable is not otherwise so satisfied within that 90-day period, such amount, on

the last day of such period, will be deemed (1) to be paid between U.S. Entity and

Non-U.S. Entity in satisfaction of the payable, and (2) to be paid (directly or

indirectly, as specified below) between U.S. Entity and Non-U.S. Entity in the

opposite direction (that is, from the deemed recipient of the intercompany payable

to the deemed payor of the intercompany payable). These two deemed payments

on the same day will cancel and thus yield no net cash flow between these two

entities. The second of these deemed payments will be referred to as the “reverse

payment.” The reverse payment will be deemed to be as follows:

If the net APA Primary Adjustment increases U.S. income:

[]

The reverse payment will be deemed to be a contribution to capital

from U.S. Entity to Non-U.S. Entity, either directly, or indirectly

through the corporate chain, as the case may be.

[]

The reverse payment will be deemed to be a distribution from U.S.

Entity to Non-U.S. Entity, either directly, or indirectly through the

corporate chain, as the case may be.

[]

The reverse payment will be deemed to be a distribution from U.S.

Entity to #COMMON PARENT, either directly, or indirectly

through the corporate chain, as the case may be, followed by a

contribution by #COMMON PARENT to non-U.S. Entity, either

directly or indirectly through the corporate chain, as the case may

be.

If the net APA Primary Adjustment decreases U.S. income:

[]

The reverse payment will be deemed to be a contribution to capital

from non-U.S. Entity to U.S. Entity, either directly, or indirectly

through the corporate chain, as the case may be

lowed by a

contribution by #COMMON PARENT to non-U.S. Entity, either

directly or indirectly through the corporate chain, as the case may

be.

If the net APA Primary Adjustment decreases U.S. income:

[]

The reverse payment will be deemed to be a contribution to capital

from non-U.S. Entity to U.S. Entity, either directly, or indirectly

through the corporate chain, as the case may be.

[]

The reverse payment will be deemed to be a distribution from non-

U.S. Entity to U.S. Entity, either directly, or indirectly through the

corporate chain, as the case may be.

[]

The reverse payment will be deemed to be a distribution from non-

U.S. Entity to #COMMON PARENT, either directly, or indirectly

through the corporate chain, as the case may be, followed by a

contribution by #COMMON PARENT to U.S. Entity, either

directly, or indirectly through the corporate chain, as the case may

be.

This situation is generally described in paragraph 4.66 of the OECD Guidelines, and in U.S.

Treasury Regulations section 1.482-1(g) and Rev. Proc. 99-32.

In this APA, if applicable:

[]*

For the APA Tax Year(s) ending on or before #DATE, it is agreed that the net

APA Primary Adjustment(s), if any, from the application of the Covered Methods

are as follows: #FOR EACH SUCH APA TAX YEAR, DESCRIPTION OF

WHETHER THERE IS A NET APA PRIMARY ADJUSTMENT, AND IF SO

THE AMOUNT AND DIRECTION. IF THERE IS MORE THAN ONE

COVERED METHOD FOR A REPATRIABLE ISSUE, ALSO PROVIDE A

TABLE SHOWING THE DERIVATION, FOR EACH SUCH APA TAX YEAR,

OF THE NET APA PRIMARY ADJUSTMENT FROM THE APA PRIMARY

ADJUSTMENT (OR LACK OF ONE) FOR EACH SUCH COVERED

METHOD. #FOR ANY SUCH NET APA PRIMARY ADJUSTMENTS,

DESCRIPTION OF THE MEANS BY WHICH THE CONFORMING

ADJUSTMENT HAS BEEN OR WILL BE SATISFIED, WITH APPLICABLE

DATES.

Definitions

The definitions in the table below apply to this APA

VATION, FOR EACH SUCH APA TAX YEAR,

OF THE NET APA PRIMARY ADJUSTMENT FROM THE APA PRIMARY

ADJUSTMENT (OR LACK OF ONE) FOR EACH SUCH COVERED

METHOD. #FOR ANY SUCH NET APA PRIMARY ADJUSTMENTS,

DESCRIPTION OF THE MEANS BY WHICH THE CONFORMING

ADJUSTMENT HAS BEEN OR WILL BE SATISFIED, WITH APPLICABLE

DATES.

Definitions

The definitions in the table below apply to this APA.

The defined terms in this table include certain measures of profitability (e.g., operating

profit, operating margin). Most of these measures are ultimately defined in terms of sales

revenue, operating expenses, and operating assets (defined terms), and cogs and non-interest-

bearing liabilities (undefined terms). The definitions of sales revenue, operating expenses, and

operating assets contain a limitation to the relevant business activity. Similarly, each use of the

terms “cogs” and “non-interest-bearing liabilities” is accompanied by a limitation to the relevant

business activity. Therefore, the measures of profitability based on these five terms all are

defined with a limitation to the relevant business activity. (Certain other measures of

profitability in this table relate to the provision of services and are defined with reference to

those services. Therefore, those measures as well contain a limitation to the relevant business

activity.)

Term

Definition

Arm’s Length Range

With respect to a particular Covered Method, a numerical range

that defines the values for which certain financial results of the

Tested Party are considered to satisfy the arm’s length standard.

(This term may be referenced in section 4 of this Appendix A.)

APA Primary

Adjustment

(Defined in section 5 of this Appendix A.)

APA Covered Year

(Defined in section 2 of this Appendix A.)

APA Term

(Defined in section 2 of this Appendix A.)

APA Tax Year

(Defined in section 2 of this Appendix A.)

Applicable Accounting

Standard

The Applicable Accounting Standard is #CHOOSE FROM U.S.

GAAP, IFRS, ETC. for U.S

erenced in section 4 of this Appendix A.)

APA Primary

Adjustment

(Defined in section 5 of this Appendix A.)

APA Covered Year

(Defined in section 2 of this Appendix A.)

APA Term

(Defined in section 2 of this Appendix A.)

APA Tax Year

(Defined in section 2 of this Appendix A.)

Applicable Accounting

Standard

The Applicable Accounting Standard is #CHOOSE FROM U.S.

GAAP, IFRS, ETC. for U.S. Taxpayer and #CHOOSE FROM U.S.

GAAP, IFRS, ETC. for Non-U.S. Taxpayer.

Berry ratio

The ratio of gross profit to operating expenses.

Code

The U.S. Internal Revenue Code of 1986, title 26 of the United

States Code, as amended.

correspond,

corresponding

(With regard to APA Covered Years and APA Tax Years, defined

in section 2 of this Appendix A; with regard to Covered Issues and

Covered Methods, defined in section 4 of this Appendix A.)

Covered Entity(ies)

(Defined in section 1 of this Appendix A.)

Covered Issue(s)

(Defined in section 3 of this Appendix A.)

Covered Method

A method used to resolve one or more Covered Issues, as described

in section 4 of this Appendix A. (In some cases, this method may

be a “transfer pricing method” within the meaning of chapter II of

the OECD Guidelines and U.S. Treasury Regulations section 1.482-

1(b).)

Critical Assumption

fails, failure of a Critical

Assumption

A Critical assumption “fails” when the Critical Assumption has not

been met. This situation is referred to as the “failure” of the

Critical Assumption.

Early Termination

A termination of this APA’s effectiveness, either in its entirely or

only as applied to certain Covered Issues before the end of the APA

Term. Such a termination could result from one or more of the

following circumstances: (i) a Critical Assumption failure, (ii) a

violation of the terms and conditions of this APA, (iii) a

cancellation of the APA under Rev. Proc. 2015-41, and (iv) an

amendment of the APA

of this APA’s effectiveness, either in its entirely or

only as applied to certain Covered Issues before the end of the APA

Term. Such a termination could result from one or more of the

following circumstances: (i) a Critical Assumption failure, (ii) a

violation of the terms and conditions of this APA, (iii) a

cancellation of the APA under Rev. Proc. 2015-41, and (iv) an

amendment of the APA. If an Early Termination so terminates this

APA’s effectiveness as applied to a particular Covered Issue, the

Early Termination is said to “apply” to or for that Covered Issue.

Any such termination of effectiveness would occur as of the

end of an APA Tax Year (see Rev. Proc. 2015-41, section 7.06).

Because such end of an APA Tax Year is before the end of the

APA Term, such end of an APA Tax Year is also the end of the

corresponding APA Covered Year (see the definitions of APA Tax

Year and APA Covered Year in section 2 of this Appendix A).

Thus, an Early Termination always would occur as of the end of an

APA Covered Year. That fact is assumed in the definitions in this

table of Last Effective APA Covered Year and Last Effective APA

Subterm Covered Year.

Gross profit

Sales revenue, less cost of goods sold for the relevant business

activity.

Gross profit margin

gross profit, divided by sales revenue

Gross profit markup

gross profit, divided by cost of goods sold for the relevant business

activity

Gross services margin

In connection with a provision of services, the ratio of gross

services profit to the price paid for the services in an uncontrolled

transaction. For this purpose, gross services profit equals the

amount of such price that is retained by the Tested Party.

Gross services profit

markup

In connection with a provision of services, gross services profit,

divided by transactional costs. For this purpose, gross services

profit equals sales revenue less transactional costs

to the price paid for the services in an uncontrolled

transaction. For this purpose, gross services profit equals the

amount of such price that is retained by the Tested Party.

Gross services profit

markup

In connection with a provision of services, gross services profit,

divided by transactional costs. For this purpose, gross services

profit equals sales revenue less transactional costs. Also, for this

purpose, transactional costs equal costs directly attributable to

providing the services. Such costs would include, for example, all

compensation attributable to employees directly involved in the

performance of such services, and costs of materials and supplies

consumed or made available in rendering the services.

IFRS

International Financial Reporting Standards.

Invested capital

Operating assets, less non-interest-bearing liabilities used in the

relevant business activity.

IRS

The Internal Revenue Service, an agency of the U.S. government.

IFRS

International Financial Reporting Standards.

Last Effective APA

Covered Year

For a particular Covered Method, the last APA Covered Year for

which this APA remains effective as to the Covered Issue(s)

corresponding to that Covered Method. The Last Effective APA

Covered Year will be the last APA Covered Year unless an Early

Termination applies to such Covered Issue(s). See also the

definition in this table of Early Termination.

Last Effective APA

Subterm Covered Year

For a particular Covered Method, and with reference to a particular

set of APA Covered Years that is defined as a subterm, the last

APA Covered Year in the subterm for which this APA remains

effective as to the Covered Issue(s) corresponding to that Covered

Method. The Last Effective APA Subterm Covered Year will be

the last APA Covered Year in the subterm unless an Early

Termination applies to such Covered Issue(s) and renders the APA

ineffective as to such Covered Issue(s) before the end of the

subterm

term, the last

APA Covered Year in the subterm for which this APA remains

effective as to the Covered Issue(s) corresponding to that Covered

Method. The Last Effective APA Subterm Covered Year will be

the last APA Covered Year in the subterm unless an Early

Termination applies to such Covered Issue(s) and renders the APA

ineffective as to such Covered Issue(s) before the end of the

subterm. See also the definition in this table of Early Termination.

Markup on total costs

The ratio of operating profit to total costs.

Median

With respect to a particular Arm’s Length Range, the median of a

set of observations of market data from which that Arm’s Length

Range was determined.

Non-U.S. Taxpayer

(Defined in section 1 of this Appendix A.)

Non-U.S. Covered

Entity(ies)

(Defined in section 1 of this Appendix A.)

OECD Guidelines

Organisation for Economic Co-operation and Development, OECD

Transfer Pricing Guidelines for Multinational Enterprises and Tax

Administrations (July 2017).

OECD PE Report

Organisation for Economic Co-operation and Development, 2010

Report on Attribution of Profit to Permanent Establishments (July

22, 2010).

Operating assets

The value of all assets used in the relevant business activity,

including fixed assets and current assets (such as accounts

receivable and inventories). The following items are excluded from

operating assets: cash, cash equivalents, short-term investments,

deferred tax assets, tax refunds, intangibles, investments in

subsidiaries, portfolio investments.

Operating expenses

All expenses (including depreciation) not included in cost of goods

sold except for interest expense, domestic and foreign income

taxes, amortization of intangibles, and any other expenses not

related to the operation of the relevant business activity. Operating

expenses normally include, for example, expenses associated with

advertising, promotion, sales, marketing, warehousing and

distribution, administration, and a reasonable allowance for

depreciation. For U.S

ept for interest expense, domestic and foreign income

taxes, amortization of intangibles, and any other expenses not

related to the operation of the relevant business activity. Operating

expenses normally include, for example, expenses associated with

advertising, promotion, sales, marketing, warehousing and

distribution, administration, and a reasonable allowance for

depreciation. For U.S. Taxpayer, foreign income taxes are defined

in U.S. Treasury Regulations section 1.902-1(a)(7).

Operating margin

The ratio of operating profit to sales revenue.

Operating profit

Sales revenue, less cost of goods sold for the relevant business

activity, less operating expenses.

Rev. Proc. 99-32

A revenue procedure issued by the IRS that is cited as Rev. Proc.

99-32, 1999-2 C.B. 296.

Rev. Proc. 2015-41

A revenue procedure issued by the IRS that is cited as Rev. Proc.

2015-41, 2015-35 I.R.B 263.

Repatriable Issue

(Defined in section 6 of this Appendix A.)

Relevant Financial Data

With respect to a particular Covered Method, the financial results

of the Tested Party that are tested, together with any other financial

data (of the Tested Party or any other party) that are considered in

determining compliance with the Covered Method.

Return on invested

capital

(Defined in the same way as “return on operating assets,” but with

“operating assets” replaced by “invested capital” wherever it occurs

in the definition.)

Return on operating

assets

With respect to a particular Covered Method, the Tested Party for

that Covered Method, and a testing period used in that Covered

Method, the operating profit over the testing period divided by the

time-weighted average operating assets over the testing period

ssets,” but with

“operating assets” replaced by “invested capital” wherever it occurs

in the definition.)

Return on operating

assets

With respect to a particular Covered Method, the Tested Party for

that Covered Method, and a testing period used in that Covered

Method, the operating profit over the testing period divided by the

time-weighted average operating assets over the testing period.

For this purpose, the time-weighted average operating assets

over the testing period is the sum, over all APA Covered Years in

the testing period, of the following product: (i) the simple average

of the operating asset levels at the start and end of the APA Tax

Year corresponding to such APA Covered Year, multiplied by (ii)

the ratio of the number of calendar days in the APA Covered Year,

to 365.

For example, suppose that (i) the testing period consists of

two consecutive APA Covered Years, the first with 183 calendar

days and the second with 366 calendar days, (ii) the total operating

profit over those two years is exactly 3.4, and (iii) the operating

assets levels are exactly 10 at the start of the APA tax year

corresponding to the first APA Covered Year, 16 at the end of the

APA Tax Year corresponding to the first APA Covered Year

(which is also the start of the APA Tax Year corresponding to the

second APA Covered Year), and 22 at the end of the APA Tax

Year corresponding to the second APA Covered Year. Then the

time-weighted average operating assets over the testing period is

[(10+16)/2]*(183/365) + [(16+22)/2]*(366/365) = 25.5699. The

return on operating assets is then 3.4/25.5699 = 13.30%.

Rollback Period

(This term, if applicable, is defined in section 2 of this Appendix

A.)

Sales revenue

Total receipts from sale of goods and provision of services, less

returns and allowances, for the relevant business activity.

Tax year

A standard or irregular year that is used for tax reporting purposes.

For U.S. Taxpayer, a tax year is a “taxable year,” as defined in

Code section 441

Rollback Period

(This term, if applicable, is defined in section 2 of this Appendix

A.)

Sales revenue

Total receipts from sale of goods and provision of services, less

returns and allowances, for the relevant business activity.

Tax year

A standard or irregular year that is used for tax reporting purposes.

For U.S. Taxpayer, a tax year is a “taxable year,” as defined in

Code section 441.

Tested Party

(Defined in section 4 of this Appendix A with regard to a particular

Covered Method.)

Testing period

The time period over which financial results are tested (see section

4 of Appendix A to this APA).

Total costs

Cost of goods sold for the relevant business activity, plus operating

expenses.

U.S. Treasury

Regulations

Tax regulations issued by the U.S. Treasury Department, found at

title 26 of the Code of Federal Regulations.

U.S. Covered

Entity(ies)

(Defined in section 1 of this Appendix A.)

U.S. Effective Date

The date, or later date of the dates, upon which the APA is executed

by the IRS and by or on behalf of each U.S. Covered Entity.

U.S. GAAP

U.S. generally accepted accounting principles.

U.S. return

Any of the “Returns with respect to income taxes under subtitle A”

required by Code section 6012, and any “return” for a partnership

required by Code section 6031.

U.S. Taxpayer

(Defined in section 1 of this Appendix A.)

APPENDIX B

CRITICAL ASSUMPTIONS

The Critical Assumptions are:

The Covered Entities’ business activities, functions performed, risks assumed,

assets employed, contractual terms, markets, and economic conditions faced in

relation to the Covered Issue(s) will remain materially the same as described in

the APA Request. For this purpose, a mere change in business results will not be

a material change.

SSUMPTIONS

The Critical Assumptions are:

The Covered Entities’ business activities, functions performed, risks assumed,

assets employed, contractual terms, markets, and economic conditions faced in

relation to the Covered Issue(s) will remain materially the same as described in

the APA Request. For this purpose, a mere change in business results will not be

a material change.

The Covered Entities’ financial accounting methods and classifications and

methods of estimation in relation to the Covered Issue(s) and Covered Method(s)

will remain materially the same as described or used in the APA Request.

If indicated, the effect of a critical assumption failure may be limited as follows:

[]

The failure of Critical Assumptions #XXX listed above will affect the

effectiveness of this APA only as to Covered Issues #YYY listed in Appendix A.

Thus, as to the other Covered Issues, the APA will remain in force (except to the

extent some other condition affects the APA's effectiveness as to those Covered

Issues).

The Covered Entities will not cause a critical assumption to fail for the purpose of

rendering the APA ineffective, unless they have an independent business justification (unrelated

to rendering the APA ineffective) for the action that causes the critical assumption to fail. If one

or more Covered Entities do cause a critical assumption to fail for the purpose of rendering the

APA ineffective, and without such independent business justification, then the Covered Entities

will not withhold consent to an amendment to this APA to the effect that this APA will continue

in force without regard to such failure. In this case, if a Covered Entity refuses to sign such an

amendment, such an amendment may be executed without such signature and will then have the

same force and effect as if the amendment had such signature

usiness justification, then the Covered Entities

will not withhold consent to an amendment to this APA to the effect that this APA will continue

in force without regard to such failure. In this case, if a Covered Entity refuses to sign such an

amendment, such an amendment may be executed without such signature and will then have the

same force and effect as if the amendment had such signature.

APPENDIX C

APA RECORDS AND ANNUAL REPORT

APA RECORDS

The APA Records will consist of all documents listed below for inclusion in the Annual

Report, as well as all documents, notes, work papers, records, or other writings that support the

information provided in such documents.

ANNUAL REPORT

An Annual Report must be submitted for each APA Tax Year in accordance with paragraph 6(e)

of the APA and section 7.02 of Rev. Proc. 2015-41.

For each APA Tax Year, the Annual Report (and each copy or version as required by paragraph

6(e) of the APA) will include:

Two copies of a properly completed APA Annual Report Summary in the form of

Appendix D to this APA, one copy of the form bound with, and one copy provided

separately from, the rest of the Annual Report. (The electronic version of the Annual

Report need have only one copy of this item.)

A table of contents organized according to the additional required items listed below.

For such APA Tax Year and the corresponding APA Covered Year, statements that fully

identify, describe, analyze, and explain:

All material differences between the Covered Entities’ business activities,

functions performed, risks assumed, assets employed, contractual terms, markets,

and economic conditions faced in relation to the Covered Issues during such APA

Covered Year from those same items described in the APA Request. If there have

been no such material differences, the Annual Report will include a statement to

that effect.

nces between the Covered Entities’ business activities,

functions performed, risks assumed, assets employed, contractual terms, markets,

and economic conditions faced in relation to the Covered Issues during such APA

Covered Year from those same items described in the APA Request. If there have

been no such material differences, the Annual Report will include a statement to

that effect.

All material differences between Covered Entities’ financial accounting methods

and classifications and methods of estimation in relation to the Covered Issues

and Covered Methods used during such APA Covered Year, from those described

or used in the APA Request. If any change was made to conform to changes in

the Applicable Accounting Standard, U.S. Taxpayer will specifically identify the

change. If there have been no such material differences, the Annual Report will

include a statement to that effect.

Regarding notices under paragraph 16 of the APA:

A current statement of how the IRS should provide such notices to U.S.

Taxpayer (and, if applicable, to U.S. Taxpayer’s representative).

ii.

A copy of any such notices that were submitted by U.S. Taxpayer to the

IRS after the last Annual Report was submitted (or, if there was no prior

Annual Report, after the APA was executed). If there were no such

notices, the Annual Report will include a statement to that effect.

Any failure of any Critical Assumption. If there has been no such failure, the

Annual Report will include a statement to that effect.

Whether or not material information submitted while the APA Request was

pending is discovered to be false, incorrect, or incomplete, and if so a correction

or completion of that information, as applicable.

include a statement to that effect.

Any failure of any Critical Assumption. If there has been no such failure, the

Annual Report will include a statement to that effect.

Whether or not material information submitted while the APA Request was

pending is discovered to be false, incorrect, or incomplete, and if so a correction

or completion of that information, as applicable.

Any change to any entity classification for federal income tax purposes (including

any change that causes an entity to be disregarded for federal income tax

purposes) of any Worldwide Group member that is a Covered Entity or is

otherwise relevant to the Covered Issue(s) or Covered Method(s).

The following regarding any APA Primary Adjustments made for such APA Tax

Year under Appendix A to this APA:

The amounts of any APA Primary Adjustments;

ii.

The circumstances that led to such APA Primary Adjustments being

necessary;

iii.

A calculation of the net APA Primary Adjustment as defined in Appendix

A to this APA; and

iv.

A complete description of the means by which the conforming adjustment

(see section 6 of Appendix A to this APA) is accomplished, including:

a description of any accounts payable established, including the

entities involved and when the payables are established;

a description of any amounts paid or deemed paid (including

amounts paid or deemed paid in satisfaction of an intercompany

payable established as described in section 6 of Appendix A to this

APA, and including any deemed reverse payments as described in

section 6 of Appendix A to this APA), that specifies the entities

involved, when the amounts are paid or deemed paid, and by what

means any amounts are actually paid; and

the character (such as capital, ordinary, income, expense, dividend,

contribution to capital) and country source of any payments and

deemed payments, and the specific affected line item(s) of any

affected U.S. return;

ppendix A to this APA), that specifies the entities

involved, when the amounts are paid o

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