INTRODUCTION Contributed by: Paolo Ludovici, Luca Tortorella, Marlinda Gianfrate and Angelica Masciulli, Gatti Pavesi Bianchi Ludovici
APAs, with 49 actively managing cases. In 2024, the number of bilateral APAs filed increased by 3%, and roughly a quarter of the inventory was closed, consist - ent with 2023. The average closure time increased to 39.6 months from 36.8 months in 2023. Bilateral APAs show increased efficiency and usage but remain time- intensive, making them more suitable for complex, high-value cases. The rise of co-operative compliance programmes and the OECD’s enhanced International Compliance Assurance Programme (ICAP) highlight the importance of adhering to the Transfer Pricing Guidelines. However, participation in co-operative compliance programmes does not eliminate the risk of tax dis - putes in other jurisdictions involved in the same intercompany transactions. Transfer pricing involving multiple jurisdictions requires a strategic evaluation of tools to manage the risks of double taxation, as no single mechanism guarantees complete tax certainty. Compliance with transfer pricing rules: relevance for single states and taxpayers Beyond the strategic tools of co-operative compliance mentioned above, adherence to transfer pricing rules remains a key priority for both states and taxpayers. For example, the Internal Revenue Service (IRS) in the United States has strengthened transfer pricing enforcement through targeted initiatives and expand - ed audit activity. In parallel, the Supreme Court’s Lop- er Bright decision (June 2024), which overturned the Chevron doctrine, has started to reshape tax litigation by requiring courts to exercise independent judgment and adopt the best reading of the statute rather than automatically deferring to agency interpretations. This shift has influenced tax cases, with the courts scru - tinising IRS rules more closely, as in the recent 3M case where the Eighth Circuit parsed Section 482 of the Code sentence by sentence and, relying on Loper Bright , concluded that Treasury Regulation Section 1.482-1(h)(2) did not offer the best reading of the stat - ute. In 2025, several Supreme Court decisions signifi - cantly clarified the application of transfer pricing rules in Korea. The courts reaffirmed that the burden of proof for transfer pricing adjustments lies with the
tax authorities and emphasised the need for a robust comparability analysis when applying the Transac - tional Net Margin Method (TNMM), particularly with respect to differences in products, functions and risks. The Supreme Court also clarified that prices agreed between shareholders in a joint venture cannot automatically be considered arm’s length and must be supported by recognised transfer pricing meth - ods under the Law for Coordination of International Taxes Affairs (LCITA). In addition, legislative amend - ments introduced in December 2025 strengthened the documentation requirements for self-initiated transfer pricing adjustments, requiring taxpayers to provide evidence that a corresponding adjustment has been recognised in the counterparty’s jurisdiction. Finally, Korea has continued to expand its international tax framework and administrative transparency, including the expansion of its treaty network to 97 tax treaties and the publication of the 2024 APA Annual Report in November 2025. Other jurisdictions have also introduced developments aimed at strengthening compliance and dispute-pre - vention mechanisms. In December 2025, the UAE issued non-binding general guidance on procedural aspects of APAs. In Austria, the Tax Amendment Act 2025 introduced a unified 15% minimum tax rate for foreign subsidiaries and adopted the OECD’s updat - ed rules on home office permanent establishments. Cyprus has also entered a phase of legislative reform, including targeted changes such as an expanded defi - nition of connected persons, higher Local File thresh - olds and a shorter tax return filing deadline. Recent developments in Switzerland, by contrast, mainly arise from case law and changes in the interna - tional trade environment. The Swiss Federal Supreme Court confirmed the use of the cost-plus method in a hydropower case and accepted a cost base including income taxes and a notional return on equity, although this approach applies only in a domestic context. In addition, a cantonal court decision reaffirmed the Swiss principle of periodicity, rejecting the use of multi-year averaging to justify low profitability in a spe - cific year. Finally, increased tariff volatility since 2025 has raised new challenges in the interaction between transfer pricing and customs valuation in Switzerland.
9 CHAMBERS.COM
Powered by FlippingBook