This section describes the typical process of an APA application. Each step in the process will be described separately.

The process described includes:

  • Overview of the process;
  • Ad 1. Informal contact;
  • Ad 2. Pre-filing meeting;
  • Ad 3. Formal application;
  • Ad 4. Evaluation;
  • Ad 5. Negotiation between tax authorities;
  • Ad 6. Formal agreement between tax authorities.

Overview of the process

The Danish Tax Agency does not have a fixed procedure that must be followed by an APA applicant, and therefore there is some flexibility in the exact course and duration of the process. Specific, internationally agreed rules on bilateral and multilateral APAs only exist to a limited extent. Since two or more competent authorities are always involved, and since the character of the questions and answers can be very different, both in content and scope, the process and its individual steps can only be described in general terms. Typically, the process can be divided into the following steps:

  • The enterprise’s first informal contact with the competent authority of the Danish Tax Agency;
  • If the enterprise wishes to initiate a bilateral or multilateral APA, it will contact the competent authority, and an informal meeting will be held (a pre-filing meeting). Typically, the pre-filing meeting is held between the enterprise and “its" competent authority. If deemed appropriate, it might also be possible to organise a joint meeting with the competent tax authorities of both states;
  • The enterprise submits a formal request to all the competent tax authorities involved;
  • The tax authorities evaluate the documents submitted and may also request additional information;
  • The tax authorities negotiate the terms of the APA;
  • A formal agreement (an APA) is concluded between the competent authorities.

There are no internationally agreed binding time limits for the time it may take to enter into an APA. The duration of the process depends on factors such as the complexity of the issues, their economic significance, and which and how many competent authorities will be involved in the APA.

If the application exclusively concerns transactions to be made between enterprises that are all located in EU states, the aim is to complete the APA process within 18 months of receipt of a comprehensive application.

In practice, it often takes 2 to 3 years to negotiate a bilateral or multilateral APA, whereas extensions of existing APAs in general take a much shorter time.

The applicant will be kept regularly informed about the status of the process.

Re 1. Informal contact

Typically, the enterprise makes informal contact with the competent authority of the Danish Tax Agency before it takes a decision on whether or not to submit a formal application. In practice, a schedule for the subsequent course of the APA can only be made once both/all competent tax authorities have been able to obtain information that gives them a more precise basis for decision-making.

Re 2. Pre-filing meeting

In practice, the APA process is often quite resource-intensive. In order to enable the enterprise to assess the expedience of entering into an APA and to give the enterprise an indication of the type of information that will be required as well as the timeframe to be expected, it will often be appropriate to have an informal preliminary meeting between the enterprise and the competent authority. Such informal meetings are normally referred to internationally as pre-filing meetings.

At this initial stage of the process, the competent authority and the enterprise have the opportunity, on a more informal basis, to discuss, for example, the choice of transfer pricing methods and essential conditions to enter into an agreement.

It is advantageous if the competent authority has sufficient information available at the pre-filing meeting to evaluate whether a subsequent formal request is likely to be accepted and processed by that competent authority or by the competent authorities of the other states. There must be, at the very least, a description of the enterprise’s activities as well as of the transactions that are to be evaluated. In addition, the competent authority of the Danish Tax Agency recommends that the documentation includes an identification of all the enterprises concerned, the preferred transfer pricing method, the preferred validity period, whether or not the enterprise intends for the agreed transfer pricing method to be applied to earlier years (known as roll-back), and a statement of all the states that will be involved.

There might be a pre-filing meeting where both/all the respective competent tax authorities participate. However, this requires that all of the competent tax authorities are willing to attend such a meeting.

Re 3. Formal application

Typically, written APA requests are submitted to both the competent authorities concerned at the same time. See section C.D. for a closer examination of the expected content of an APA application.

Re 4. Evaluation

Once the final application has been received, both competent authorities will evaluate the case. This process usually involves both authorities asking further questions and requesting additional documentation from the enterprise. The different competent authorities typically do this separately. There may also be meetings between the applicant and the respective competent authorities.
When the tax authorities feel that the issue has been adequately reviewed, they prepare their positions on the issue. Usually this is done by writing so-called position papers, which express the tax authorities’ negotiating positions.

Re 5. Negotiations between competent tax authorities

A negotiation process typically starts with the exchange of position papers. The exchange normally takes place either by post or email, preferably well in advance of the actual negotiations to afford both parties the opportunity to understand and consider the position of the other authority.

The negotiations between the competent authorities will take place via post, teleconferences, email and potentially meetings.

Negotiations are carried out solely between the competent authorities, and although the enterprise is a party to the process, it does not have the right to take part in the negotiations between the competent authorities. Particularly in the initial stages of the process there might, however, be a common interest in the participation of the enterprise in one or more meetings to present the case and to give facts.

The competent authorities will keep the enterprise informed about the course of the proceedings.

Re 6. Formal agreement between the competent authorities

Once the competent authorities have agreed on the transfer prices for the intra-group transactions concerned, this is committed to paper in a formal and written agreement, which is signed by the competent authorities of the two states.

The final agreement will not be published in Denmark. As for the rules applying in other states, please refer to the foreign tax authorities.