How do Unilateral APAs overcome the issues of legitimate expectations, tax transparency and state aid in the European Union?

Abstract: Advance pricing arrangement (“APA”) becomes a common tool to attract foreign investors to carry out their business in the Member States’ territory. The advantage of APA which providing legitimate expectations to the taxpayers is one of the reasons of why the companies file an APA request to the tax authorities. However, APAs are not free from issues or problems arose, especially in relation to the disruption of the harmony in the internal market within the European Union (“EU”). The unilateral APA will become a problem when it is implemented in the unlawful way and receives preferential tax treatment that may lead to the state aid infringement in the meaning of EU rules. Yet, this matter could be solved by increasing the tax transparency which unilateral APAs are lack of. Thus, in order to answer the critical needs for tax transparency, the European Commission published the tax transparency package on 18 March 2015 as a proposal to introduce a quarter basis of automatically exchanging information in terms of Member State’s cross-border tax rulings and APAs.