The transfer pricing obligations in Denmark were tightened significantly with effect for financial years from 2021. Practice has shown that foreign groups are often not aware of their obligation to submit transfer pricing documentation in Denmark, although penalties can be material. Following up on our webinar with BDO Denmark in December 2022 please find a short summary on the new transfer pricing documentation obligations in Denmark:
1. Transfer pricing documentation-filing requirement
For financial years from 2021 on a company is obliged to prepare a transfer pricing documentation in Denmark if:
- the company is a part of a group that employs 250 or more employees or
- has a revenue exceeding DKK 250 million (approximately EUR 33.6 million) and a balance sheet sum above DKK 125 million (approximately EUR 16.8 million) or
- the company has intercompany transactions with companies located outside the EU/EEA or in countries with which Denmark does not have a double-taxation agreement in place, regardless of the size of the group.
Please note that the above thresholds are measured at group level (not at the level of the Danish group entity)! Thus, even if a multinational group has only one small operation in Denmark with not even a handful of employees it may already be obliged to file a transfer pricing documentation. The Danish transfer pricing rules require a mandatory submission (as of financial year 2021) of Master file and Local file.
2. Filing requirement
The deadline for filing the transfer pricing documentation is 60 days after the deadline of the tax return. The transfer pricing documentation must be uploaded to the digital platform of the Danish Tax Authorities in two separate files and in a format which is readable to a computer. If appendices are applied in separate documents these have to be uploaded as well.
If benchmarking studies are relevant to the transfer pricing method, such benchmarking studies have to be prepared and submitted.
3. Penalties
As a main rule, the penalty for failing to submit or submitting a TP documentation which does not comply with content requirements is set out to be:
DKK 250,000 (approximately EUR 33,600) per company per financial year + 10% of a potential income adjustment, in addition, the burden of the proof will be reversed in tax disputes relating to transfer pricing.
Subject to penalties regarding transfer pricing in Denmark are companies/ groups who:
- Provide incorrect or misleading information concerning the number of employees and/ or the revenue and balance of the company/ group when submitting the tax return to the Danish tax authorities.
- Fail to submit the transfer pricing documentation within the obligatory deadline or submit the documentation post-deadline OR submits a documentation which does not comply with the content requirements.
If a transfer pricing documentation is submitted after the submission deadline but is prepared in the required quality, the fine may be reduced to DKK 125,000 (approximately EUR 16,800).
Your contacts at BDO
The Center of Excellence International Tax Services & Transfer Pricing in BDO’s Frankfurt office is looking forward to support you in planning, documenting and/ or defending transfer prices.