New proposed legislation on transfer pricing documentation in Denmark

Arne Riis, Partner, Tax |
Christian Finco, Director, Transfer Pricing |

14 October 2020

On October 7, 2020, the Ministry of Taxation in Denmark resubmitted a proposed amendment to the Danish transfer pricing regulations, which means that transfer pricing documentation in the future must be submitted to the tax authorities along with the corporate income tax return.

The new and stricter requirements in the proposed legislation will apply to all companies who are covered by the rules which demands them to prepare mandatory transfer pricing documentation.

According to the current legislation and regulations, the transfer pricing documentation must be finalised but not submitted to the tax authorities at the deadline for filing the income tax return. The companies will only have to submit the documentation if the Danish Tax Agency request it.

Transfer pricing documentation consists of:

  • A master file for the entire affiliate
  • A local file for each company in the group

If the transfer pricing documentation is non-compliant or not prepared/submitted in timely manner the company will risk extensive sanctions in form of fines and it will give the Danish Tax Agency mandate to perform a discretionary assessment of the taxable income in the company.

This also applies even if the company subsequently prepares proper transfer pricing documentation. Therefore, it is most important that companies comply with the applicable rules and in the future ensure that the documentation is submitted to the authorities in timely manner.

The new legislation is expected to be adopted in its current form and will apply to tax years which start from January 1, 2021.

If you have any questions to the new proposed legislation or any other transfer pricing conditions, you are welcome to contact one of our tax advisors.