This section is about the advantages and disadvantages of submitting a request for an APA. The section contains the following aspects:

  • Resources;
  • Avoid double taxation;
  • Avoid transfer pricing audit;
  • The possibility to extend the APA;
  • Broad international recognition of APAs.


It is characteristic of the process in connection with bilateral or multilateral APAs that it typically requires substantial resources, both from the enterprise and from the competent authorities. Thus, the enterprise has to consider whether they are willing to make the necessary resources available to support this process. However, see the part below on the possibility to extend the duration of the APA.

The need for resources is partly due to the fact that the competent authorities of two or more states - and national tax regimes - are involved in the process.

Avoid double taxation

A bilateral or multilateral APA provides certainty to the applicant that the tax authorities of two or more states will accept the enterprise’s transfer pricing principles during the APA period.

An APA thus provides for effective protection against double taxation.

Avoid transfer pricing audit

In general, the Danish Tax Agency does not request the submission of full transfer pricing documentation for the transactions that fall within the scope of bilateral or multilateral APAs, unless a subsequent tax audit shows that the terms and conditions of the APA have not been observed. If a bilateral or multilateral APA has been concluded for all the enterprise’s controlled transactions, the Danish Tax Agency will only in exceptional situations request the transfer pricing documentation during the APA period.

In addition, the intra-group transactions covered by the APA will only in exceptional situations be subject to a tax audit during the APA period. In the event of a tax audit, the audit will normally be confined to verifying whether the enterprise has observed the terms of the APA.

The possibility to extend the APA

The validity period of an APA can often be extended quickly if the underlying conditions have not changed significantly. The majority of the APAs that the Danish Tax Agency has concluded have been extended for a further period after their expiration.

Broad international recognition of APAs

The European Commission recommends the use of bilateral APAs to avoid double taxation in the Single Market. On 5 June 2007, the Council approved the European Commission’s communication of 26 February 2007, COM(2007) 71 final, “On the work of the EU Joint Transfer Pricing Forum in the field of dispute avoidance and resolution procedures and on Guidelines for Advance Pricing Agreements within the EU”. The Communication also offers guidance to Member States on the framework for concluding APAs.