Application for an Advance Pricing Agreement regarding international transactions

In many countries, it is possible for an overseas enterprise to apply for a unilateral APA, i.e. an APA that confirms the tax treatment between the country in question and the enterprise. There is no unilateral APA programme in place in Sweden.

What is an Advance Pricing Agreement, and what are the requirements for granting one?

An Advance Pricing Agreement (APA) is an agreement made between two (a bilateral agreement) or more (a multilateral agreement) countries on pricing with regard to certain cross-border transactions carried out between members of a multinational enterprise group. As a general rule, an APA is effective for three to five tax years. An APA can only be issued if it is based on a mutual agreement entered into with a treaty partner.

An APA can only be granted if Sweden has a tax treaty with the other country. The tax treaty must also include provisions for the exchange of information between the countries. Competent authorities engage in APA negotiations within the framework of a MAP, in accordance with the applicable tax treaty. The provisions regarding MAPs can be found in Article 25 of the model tax convention published by the Organisation for Economic Co-operation and Development (OECD).

The Act on Advance Pricing Agreements regulates the eligibility of enterprises to apply for an APA relating to taxation of income from future cross-border transactions carried out between members of a multinational enterprise group. An APA is generally applicable when establishing the basis for the national income tax. In case of other enterprises than companies (enskilda näringsidkare), an APA is applicable when establishing the basis for municipal income tax.

An applicant for an APA must provide all the information necessary for the pricing of the transaction(s) to be evaluated properly. An APA cannot be issued for transactions of simple or minor nature.

It must be possible to assess the transaction(s) independently from other transactions that are not covered by the application. Anyone who wishes to discuss the prerequisites for an APA, as well as what an application must include, has the option of requesting a preliminary meeting with the competent authority.

An APA is binding for the Swedish Tax Agency in relation to the enterprise to which the agreement applies and to the transactions covered by the agreement as long as the requirements of the agreement are fulfilled. In certain circumstances, an APA can be changed, or cancelled.

Who can apply for an Advance Pricing Agreement?

Any enterprise that is – or expects to become – liable for tax in Sweden in accordance with the Swedish Income Tax Act (“Inkomstskattelag, 1999:1229”), and is also covered by a tax treaty, can apply for an APA. Both Swedish enterprises and non-Swedish enterprises with a permanent establishment in Sweden can apply for an APA.

Partnerships and other limited-liability legal entities can apply for an APA if a partner is, or expects to become, liable for tax in Sweden and is covered by a tax treaty.

What should be included in an application for an Advance Pricing Agreement?

Four physical copies of an application for an APA has to be submitted.

According to the regulation on APAs regarding international transactions (“förordning (2009:1295) om prissättningsbesked vid internationella transaktioner”), the application must include the following information:

• the Swedish and non-Swedish enterprises for which the application is being made, as well as their addresses and corporate identity numbers or equivalent identity numbers
• the tax years to which the application relates
• the countries to which the application relates
• details of whether the equivalent of an APA has been issued abroad for the same or similar transactions concerning any of the parties for which the application is being made
• a description of the operations and organisational structure of the parties concerned
• details of the nature and scope of the transactions in question
• a functional analysis
• a comparability analysis
• an outline of the suggested pricing method, and a statement concerning its applicability
• details of the assumptions on which the suggested pricing method has been based

It is essential that an application includes all the information and documentation required for the competent authority to evaluate a pricing method or transaction. This documentation could include:

• an overview of the prevailing situation and trends associated with the market in which the enterprise operates, which are expected to affect the enterprise
• details of the business strategy for the period in question, and also for previous years in cases where a change is anticipated.
• accounting records for the most recent financial years for the enterprise concerned
• agreements concerning the transactions to which the application relates
• details of any tax audits or MAPs that are significant in terms of the application
• any other relevant information
  

How to apply for an Advance Pricing Agreement

The applicant can request for a preliminary meeting with the competent authority prior to submitting an APA application, e.g. to discuss whether or not it is appropriate to apply for an APA.

When you have completed your application for an APA, please submit it to the Swedish Tax Agency at the following address:

Skatteverket
Behörig myndighet MAP/APA
205 30 Malmö
Sweden

Email: oca@skatteverket.se

Application fees for Advance Pricing Agreements

Fees are payable for each country to which the application relates. The following fees apply in Sweden:

• application for an APA: SEK 150,000
• application to renew an APA: SEK 100,000
• application to renew an APA with amendments: SEK 125,000

The Swedish Tax Agency will send you an invoice for the appropriate amount after you have applied for an APA.

Legal frameworks and other information

Below is a list of income tax treaties that Sweden has concluded with other countries that are available in the “Legal guidance” section (“Rättslig vägledning”):

• Tax conventions – list of current agreements that Sweden has made with other countries to avoid double taxation and prevent tax evasion (in Swedish) External link.

Additional material relating to legal framework and other information

• Act on Advance Pricing Agreements regarding international transactions (“Lag om prissättningsbesked vid internationella transaktioner” (SFS 2009:1289) (in Swedish) External link.
• Government bill 2009/10:17 on Advance Pricing Agreements regarding cross-border transactions (“Regeringens proposition 2009/10:17 om Prissättningsbesked vid internationella transaktioner”) (in Swedish) External link.
• Regulations on Advance Pricing Agreements regarding international transactions (“Förordning om prissättningsbesked vid internationella transaktioner (SFS 2009:1295) (in Swedish) External link.
• Application for the elimination of international double taxation (“Ansökan till Skatteverket om undanröjande av internationell dubbelbeskattning”) (in Swedish)
• OECD Manual on Effective Mutual Agreement Procedures - Index - OECD (MEMAP) External link.