New rules for transfer pricing from income year 2021
There are new rules for transfer pricing documentation, and this basically means a relaxation for transfer pricing documentation for Danish transactions, as transactions between Danish parties are generally exempt from the documentation obligation from income year 2021.
The new rules, however, mean significant changes for multinational groups with activities in Denmark.
New rules for the submission of transfer pricing documentation result in significant changes for multinational groups with activities in Denmark. The amendments oblige the companies subject to the transfer pricing documentation requirements to prepare and submit an annual transfer pricing documentation for the transfer pricing.
Let's start by telling you that transfer pricing revolves around the pricing of controlled transactions. By this is meant the transfer of goods, services, etc. between affiliated companies, main shareholders or permanent establishments. This means that in determining taxable income, this pricing must be made at arm's length, i.e., prices and terms must be set in accordance with what could have been achieved between independent parties, cf. section 2 of the Danish Tax Assessment Act.
As a rule, all controlled transactions of the taxpayer are subject to the obligation to provide documentation for transfer pricing, but there are exceptions, for example for smaller companies. So, who is actually subject to the rules?
Which companies are subject to transfer pricing documentation?
A company must prepare transfer pricing documentation for controlled transactions when the group has more than 250 employees. If there are fewer than 250 employees in the group, the group is exempt from preparing full transfer pricing documentation, but only if that company has:
Either a group turnover of less than DKK 250 million
Or a group balance sheet total of less than DKK 125 million
In countries that do not have a double taxation treaty, and where these countries are not members of the EEA or the EU, the obligation to provide documentation for transactions in companies continues to apply.
Ordinary Danish affiliated companies, taxed in accordance with the Danish Corporation Tax Act, as a rule, are not subject to the documentation obligation, and the same applies to transactions between a Danish main shareholder and a Danish company. However, even if documentation of transfer pricing is exempt, transactions between related parties must continue to comply with the arm's length principle.
Transfer pricing - new and old rules
According to the previous rules, a transfer pricing documentation only had to be handed over to the Danish Tax Agency on request, and this still applies to income years before 1 January 2021. But the new rules mean that transfer pricing documentation must now be submitted to the Danish Tax Agency no later than 60 days after the information deadline.
The mandatory submission requirement is intended to increase the companies' focus on the economic arguments for the pricing of the controlled transactions, as well as ensure the companies' plan how the necessary documentation is provided and completed at a satisfactory level.
Submit your transfer pricing documentation on time
According to the previous rules, a transfer pricing documentation only had to be handed over to the Danish Tax Agency on request, and this still applies to income years before 1 January 2021. But the new rules mean that transfer pricing documentation must now be submitted to the Danish Tax Agency no later than 60 days after the information deadline.
The mandatory submission requirement is intended to increase the companies' focus on the economic arguments for the pricing of the controlled transactions, as well as ensure the companies' plan how the necessary documentation is provided and completed at a satisfactory level.
Compliance is King …
… And it probably does not come as no surprise that your local accountant recommends that you simply get the transfer pricing documentation prepared in time - and get it submitted on time.
Avoid fines and bother
Contact Dansk Revision. We are happy to help you with a review of your transfer pricing documentation or a preparation of your transfer pricing documentation.
Do you want to know more about transfer pricing documentation?
Lately, we have prepared a number of new publications - both in English and in Danish. They can help provide an overview of the rules in the transfer pricing area, just as the annexes contain a comprehensive overview of the requirements for the content of a transfer pricing documentation.
Among other things, we go into details with:
Who is subject to the documentation requirements?
The new deadlines for submission of the transfer pricing documentation
Requirements for the content of a transfer pricing documentation
How to find the arm's length price of a controlled transaction
Which transactions are subject to the obligation to provide documentation?
Consequences of missing or inadequate transfer pricing documentation
Download the publication "New rules for transfer pricing documentation from the income year 2021" and its Appendix 1
New rules for the submission of transfer pricing documentation mean that companies that are subject to the transfer pricing documentation requirements must prepare and submit an annual transfer pricing documentation for the transfer prices in relation to the arm's length principle.
New rules for transfer pricing from income year 2021 - EN
Appendix 1: Requirements for transfer content pricing documentation - EN
New rules for transfer pricing from income year 2021 - DA
Appendix 1: Requirements for transfer content pricing documentation - DA