This section explains what information must be included in an APA application.

The section contains the following aspects:

  • The purpose of the APA-application;
  • The form of the application;
  • The nature, scope and main elements of the application.

The purpose of the APA application

The overall objective of the application is to enable the competent authorities to assess whether the chosen/proposed transfer pricing set-up is in accordance with the arm’s length principle.

Put simply, the documentation that must be included in the application is the equivalent of a good quality transfer pricing documentation, which focuses on the future rather than on the past.

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The form of the application

Applications for bilateral and multilateral APAs must be in writing, but that does not preclude telephone or similar contact between the applicant and competent authority of the Danish Tax Agency during the process. See section C.D. about the typical APA process.

The application may be written in Danish, Norwegian, Swedish or English. English is the most frequently used language.

The nature, scope and main elements of the application

The nature and scope of a bilateral or multilateral APA may vary considerably. The necessary information will therefore often differ from case to case depending on the complexity and scope of the transactions, and the competent authorities involved. In practice, the necessary information may be agreed between the applicant and the competent authorities on an ongoing basis.

The other state’s competent authority may require other information than the Danish competent authority requires. As other states may impose different requirements, the Danish competent authority will be flexible as long as the necessary information etc. is provided to both/all parties.

Ultimately, it is the Danish competent authority and the other state’s competent authority who decide what information is necessary in order to conclude an APA. However, it is in the interest of all parties that no more information than necessary is submitted. What documentation to be submitted might be usefully discussed at the pre-filing meeting.

As the bilateral and multilateral APAs quite often concern large and, from a transfer pricing perspective, rather complex transactions, the Danish Tax Agency’s experience is that it is often an advantage that the applicant has sought professional advice to prepare the APA application.

The main elements of an APA application include:

  • Description of the enterprise and of the market;
  • Description of the controlled transactions, including a detailed comparability analysis and functional analysis;
  • Description of the implementation of the proposed transfer pricing-method;
  • Critical assumptions
  • Annual reporting on compliance with the terms of the arrangement.

The nature and scope of the information in the APA application should broadly reflect the size and complexity of the enterprise and the transactions.