Transfer pricing in Denmark

Transfer pricing in Denmark at a glance

Regulation Type OECD
Are there specific transfer pricing regulations? Yes
Submission deadline CIT deadline
Submission deadline upon request 60 days
Annual update required Yes
Official language requirements Danish, Swedish, Norwegian, English
Potential impact of penalties Penalties exist

Danish tax law

Rules for transfer pricing in Denmark are based upon:

  • Tax Assessment Act Section 2;
  • Tax Control Act Section 3B;
  • Regulation no. 42 of January 24, 2006, on Transfer Pricing Documentation;
  • Danish administrative guidelines 2014-1, section C.D.11 on Transfer Pricing, and
  • Danish guideline of 15 January 2013 on valuation.

OECD

Denmark follows the OECD Transfer Pricing Guidelines.

Methods

Accepted methods

Accepted methods are:

  • the comparable uncontrolled price (CUP) method;
  • the resale price method;
  • the cost plus method;
  • the profit split method (contribution analysis or residual analysis), and
  • the transactional net margin method (TNMM).

Priority of methods

In Denmark the most appropriate method should be used. When more than one method is applicable, the traditional methods are preferred over the transactional methods.

Documentation requirements

Information that should be included in the documentation: 

  • A description of the group, including the legal group structure, the history of the group, including a description of restructurings, operational structure and primary business activities, as well as a description of the industry in which it operates;
  • A description of the Danish entity, its intercompany transactions and the other entities involved (primary business activities and three years’ key financials for all entities involved)
  • A description of each intercompany transaction;
  • Comparability analysis for each intercompany transaction, and
  • A list of any written intercompany agreement entered into by the Danish entity and a copy of any written agreement in place with foreign tax authorities regarding transfer prices.

Language

Rules for transfer pricing in Denmark prescribe that documentation should be submitted in either one of the following languages:

  • Danish;
  • Swedish;
  • Norwegian, or
  • English.

Requirements to prepare documentation annually

Transfer pricing documentation should be prepared by the filing date of the income tax return, meaning documentation should be prepared annually.

Submission deadline upon request by tax authorities

Upon request, documentation should be submitted within sixty days. Extensions of this period are not possible.

Advanced Pricing Agreements

General

In Denmark it is possible to obtain unilateral and bilateral Advanced Pricing Agreement (APA’s).

Terms

No strict terms are applied in Denmark. For every APA these terms are negotiable.

Penalties

Penalties are applicable if the transfer pricing documentation requirements are not observed either intentionally (deliberate omission), because of gross negligence, or due to the provision of incorrect and misleading information on the exemption rule for small and medium-sized companies.

 

 

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