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Annex 1 � CCA APA sample agreement

»Ê¹ÚÌåÓýapp sample draft agreement below should notÌýbe taken to indicate any entitlement to any particular form of wording beyond that required by sections 218-230 TIOPA 2010. It is provided for the assistance of taxpayers merely to help them better understand the typical types of clauses which might be found within APAs and/or which may be suitable for APAs, depending upon individual circumstances.

ADVANCE PRICING AGREEMENT

Between

TAXPAYER

And

H.M. REVENUE AND CUSTOMS

This Advance Pricing Agreement (“APA�) is made between

Taxpayer, and

HM Revenue and Customs acting through CSTD Business, Assets & International (“HMRC�)

»Ê¹ÚÌåÓýapp Taxpayer and HMRC (collectively “»Ê¹ÚÌåÓýapp Partiesâ€�) wish to enter into an APA to respect the participation of the Taxpayer in the Cost Contribution Arrangement (“CCAâ€�).

Ìý Ìý Ìý1.Ìý Identifying Information

Taxpayer(s): (typically - a company registered in (country), under registration number XXXXXXXX, resident in (country), having a tax reference YYYYY YYYYY, (with a Permanent Establishment in (country)) and a Registered Office at (address) (or place of business at (address))

Related Party: (similar information as for the taxpayer above � there may be a number of related parties)

Set out the relationship between Taxpayer and Related Party � e.g. one a subsidiary of the other or both companies members of the multi-national group Z headquartered in (country)

Ìý Ìý Ìý2.Ìý Covered Arrangement

»Ê¹ÚÌåÓýapp arrangement covered by this APA (the “Covered Transactionsâ€�) comprises the business carried on through the CCA. This includes transactions that give effect to entry, withdrawal, termination or variation of participation in the CCA.

Ìý Ìý Ìý3.Ìý Legal Effect

This APA is made pursuant to and for the purposes of section 218 Taxation (International and Other Provisions) Act 2010 (“TIOPA 2010�) and binds the Parties, for the term of this APA, to determine questions relating to the transfer pricing matters covered by the APA in accordance with its terms.

Throughout the term of the APA, Part 4 TIOPA 2010 will apply on the basis that the taxpayer is or was a participant in the CCA at arm’s length to the extent this is or was the case under any actual provision. For the avoidance of doubt, this APA does not determine the value of transfer prices in respect of CCA transactions. In particular, this APA does not resolve matters of valuation such as the expected share of benefits that will accrue to the parties, or the quantification of any other payments due by or to the Taxpayer as a consequence of CCA participation.

Ìý Ìý Ìý4.Ìý Term of the APA

Detail the rollback period too as relevant.

Ìý Ìý Ìý5.Ìý Critical Assumptions

Critical Assumptions will be specific to the case and require careful consideration but generally they will include a clause to the effect that there should be no major commercial changes governing the Covered Arrangement. In volatile, dynamic or cyclical businesses this may need some elaboration.

In CCA cases, typical Critical Assumptions will include clauses with respect to the contractual participation of the UK entity in the CCA and continuing commercial viability of the arrangement. »Ê¹ÚÌåÓýappre will generally be a requirement for relevant information to be automatically reported in Annual Reports, see below.

Ìý Ìý Ìý6.Ìý Annual Reports

Annual Reports will generally be required to confirm that the Critical Assumptions continue to have been met.

»Ê¹ÚÌåÓýapp Taxpayer is required to lodge annually, at the same time as lodging its annual company tax return form, an Annual Report signed by the authorised person (defined the same as for the purposes of the company’s tax return form) for each accounting period covered by this APA.

For the APA Years where tax returns are already filed, the Taxpayer is required to lodge an Annual Report within 90 days from the date the APA is signed.

»Ê¹ÚÌåÓýapp Annual Report should typically include the following:

1. A description of the general business operations of the Taxpayer together with a statement identifying any material differences between the descriptions of the Taxpayer’s current business operations and those described in the Taxpayer’s APA application, and if, in the Taxpayer’s judgment, there were no material differences, an affirmative statement to that effect.
2. A statement as to whether the Taxpayer has operated within the critical assumptions detailed in this APA. »Ê¹ÚÌåÓýapp statement should include any changes in and/or failure to meet critical assumptions for the relevant APA year and specific reasons, or if, in the Taxpayer’s opinion there were no changes in and/or failures to meet critical assumptions, an affirmative statement to that effect.

»Ê¹ÚÌåÓýapp Annual Report will generally accompany the Taxpayer’s tax return. »Ê¹ÚÌåÓýapp report should be sent to the CCM or, where there is no CCM, the HMRC office responsible for the Taxpayer’s tax affairs and monitoring the APA.

HMRC will review the Annual Report and if necessary, may request further information that is reasonably needed to verify that the Taxpayer has complied with the terms and conditions of this APA.

If the Taxpayer fails to provide the Annual Report or supply the additional information requested within a reasonable time, HMRC may cancel this APA.

Ìý Ìý Ìý7.Ìý Disclosure

This APA and the information, data and documents related to this APA, are subject to the same rules of confidentiality as any other taxpayer’s information provided to HMRC, and any unauthorised disclosure of information by HMRC will be a breach of those rules.

Ìý Ìý Ìý8.Ìý Revocation

Compliance with any provision of this agreement or the terms and conditions of this agreement are not conditions of the agreement having effect.

If, for any year during the APA term, the Taxpayer does not comply with the terms and conditions of this APA, or the Critical Assumptions (as defined in Clause 5 above) cease to be valid, HMRC may (subject to Clause 9Ìý below) revoke this APA and, if it does so, section 221(2) TIOPA 2010 shall apply.

HMRC may also revoke this agreement if, after the date of the agreement, Part 4 TIOPA 2010 or the transfer pricing guidelines as defined in section 164(4) TIOPA 2010 are either amended or repealed and this would have an effect on this agreement. Such a revocation would have effect from the start of the chargeable period from which that amendment or repeal has effect.

»Ê¹ÚÌåÓýapp terms and conditions of this APA may also be modified or amended upon the agreement of the Parties, subject to the terms of any bilateral/multilateral agreement.

Where the conditions of section 226 TIOPA 2010 (Annulment of agreement for misrepresentation) apply the agreement is to be treated as never made.

Ìý Ìý Ìý9.Ìý Tax Laws

Notwithstanding any statement in this APA agreement, the taxpayer remains subject to all applicable taxation laws not directly affected by this APA. »Ê¹ÚÌåÓýapp Taxpayer is entitled to any benefits or relief otherwise available under all such laws.

Signatories:

Responsible Officer or Director on behalf of Taxpayer:

Date:

Delegated Competent Authority on behalf of HMRC (usually this will be the Delegated Competent Authority who negotiated the agreement):

Date: