Denmark: Submission of transfer pricing documentation now required
Earlier this month the Danish Parliament passed a bill that now means taxpayers will have to actively submit transfer pricing (TP) documentation to the tax authority each year. This requirement is effective for tax years starting on or after 1 January 2021 and submission must occur within 60 days after the deadline to file the relevant tax return.
Until now, Danish taxpayers were required to prepare finalized transfer pricing documentation by the time the corporate tax return was filed, but only needed to submit this documentation within 60 days of a formal request by the tax authorities.
Relevant TP documentation
The newly introduced documentation submission requirement relates specifically to the Master File and Local file TP documentation.
Certain companies fall outside the requirement to prepare a Master File and a Local File for Danish purposes – Danish companies that are part of a consolidated group that have:
- Fewer than 250 employees, and
- Either less than DKK125 million (approx. Euros 16.7 million) in assets or DKK250 million (approx. Euros 33.5 million)
…fall outside the requirement to prepare a Master File or Local File (though TP documentation necessary to support the taxpayer’s transfer prices is still required, albeit in a different format).
Penalties for non-compliance
If a taxpayer does fall within the provisions to prepare a Master File and Local file, failure to submit compliant documentation in a timely manner can result in the following consequences:
- Penalty for non-compliance which is expected to start around DKK 250,000 (approx. Euros 33,000) – there is the possibility of daily penalties to accrue until documentation is submitted.
- Penalties on any upward transfer pricing adjustment of up to 10% of the adjustment amount.
- Discretionary assessment by the tax authority.