The Danish and the Chinese tax authorities have just concluded the negotiations of their first bilateral advance pricing arrangement (BAPA). Not only is this the first BAPA between Denmark and China, but it is also the first BAPA between Europe and China.

A BAPA is an agreement between the tax authorities of two nations determining the transfer price and the criteria for the controlled transactions between two related parties in a group for a fixed period of time. BAPAs are formally initiated by the taxpayer in question through the filing of a BAPA application.

The BAPA application relating to the concluded negotiations between China and Denmark was filed in August 2008 and the negotiations were only just concluded.

Director General of the Danish tax authority, Ole Kjaer, participated in the first round of negotiations and he states:

- This agreement is a cornerstone in the commercial relation between Denmark and China. Denmark is already negotiating their second BAPA with China, and, hopefully, agreements like this will help ease the pain of the current financial crisis. Furthermore, such agreements resolve actual or potential transfer pricing disputes in advance. In this way, companies obtain a higher level of certainty in relation to international taxation.

So far, Denmark has concluded ten BAPAs, of which three have been concluded in 2009. Another ten BAPAs are currently being negotiated.

For further information, please contact the Danish Customs and Tax Administration on: + 45 72 37 09 00