Mandatory submission of transfer pricing documentation
01 September 2021
A law enacted in Denmark (L28/2020) on 3 December 2020 requires Danish companies to submit a master file and local file to the Danish Tax Agency within 60 days after the deadline for filing the annual corporate income tax return.
Under the previous rules, contemporaneous transfer pricing documentation had to be prepared by the deadline for filing the annual tax return (30 June of the following year for most taxpayers), but the documentation did not have to be submitted to the Danish Tax Agency unless they requested it. Under the new rules, which apply to tax years starting on or after 1 January 2021, contemporaneous transfer pricing documentation must be submitted to the tax authorities no later than 60 days after the deadline to file the annual corporate income tax return.
A company must prepare a transfer pricing documentation in Denmark if it (measured at a group level) employs 250 or more employees or has revenue exceeding DKK 250 million and a balance sheet amount exceeding DKK 125 million.
Penalties may be imposed for failure to comply with the deadlines under the new rules and it is possible for the Danish Tax Agency to issue a discretionary (i.e., estimated) assessment. The new law clarifies the tax authorities’ powers to issue a discretionary assessment in cases where transfer pricing documentation has not been prepared in a timely manner. The decisive factor for a discretionary assessment is whether sufficient transfer pricing documentation has been submitted by the relevant deadline, regardless of whether the taxpayer subsequently prepares supplementary documentation.
The penalties for failure to comply with the submission deadline and/or transfer pricing documentation requirements can reach DKK 250,000 per company per year, plus 10% of any income adjustment. In addition, the burden of proof shifts to the taxpayer in transfer pricing-related tax disputes.
Affected taxpayers should ensure that they have compliant documentation and that they submit the master file and local file in a timely manner.