Transfer Pricing
Country Summary
Denmark
This document summarizes the transfer pricing requirements and regulations in Denmark. Denmark has introduced new transfer pricing laws that require companies to submit a master file and a local file to the Danish Tax Agency within 60 days of the annual corporate income tax return deadline. Previously, transfer pricing documentation had to be prepared by the tax return deadline but didn’t need to be submitted unless requested. This update highlights Denmark’s approach to transfer pricing and documentation.
Overview:
Transfer Pricing Regulations in Denmark
Denmark has recently enacted transfer pricing laws that mandate companies to provide a master file and a local file within 60 days of the corporate income tax return deadline. While Denmark’s transfer pricing regulations align with the OECD Transfer Pricing Guidelines, the tax administration is increasingly developing its positions, particularly where OECD guidance is lacking.
Related Party Definitions
Denmark specifies related parties based on formal control (over 50% shareholding) or actual control. A broad range of entities, including those with permanent establishments abroad and foreign entities with hydrocarbon-related activities, are subject to these rules.
Transfer Pricing Documentation Requirements
Denmark’s Tax Control Act mandates transfer pricing documentation that includes providing transfer pricing information in tax returns, producing and submitting transfer pricing documentation, and preparing and submitting CbC (Country-by-Country) reports. The documentation encompasses group information, details of controlled transactions, comparability analyses, and the implementation of pricing principles.
Advance Pricing Agreements (APAs)
Denmark offers unilateral, bilateral, and multilateral APAs without a filing fee. APAs may be extended under certain conditions.
Record Keeping and Penalties
While there are no specific transfer pricing regulations for record-keeping, Denmark’s tax control act obligates keeping materials for five years after the end of the financial year. Penalties apply for non-compliance, with a minimum penalty of DKK 250,000 plus 10% of the profit adjustment. The level of penalty may be adjusted based on the benefit achieved through non-compliance.