Danish companies that are part of a group exceeding certain financial thresholds must file transfer pricing documentation in Denmark. Presently (and in the coming days), the Danish Tax Agency is sending letters to companies which may not have met this obligation.

Generally, Danish companies are obligated to prepare and file transfer pricing documentation if they are part of a group with over 250 employees and either:

  • a balance sheet of DKK 125 million or more, or
  • an annual revenue of DKK 250 million or more.

The thresholds are calculated at group level (i.e. consolidation of the financials and number of employees of all entities in the group, Danish and foreign).

If the obligation to prepare transfer pricing documentation applies, such documentation must be prepared and filed with the Danish Tax Agency no later than 60 days after submission of the Danish income tax return.

Letters from the Danish Tax Agency

Currently, the Danish Tax Agency is sending letters to Danish companies which have not filed transfer pricing documentation but may be obligated to do so.

The Danish Tax Agency's assumption is generally made for one of two reasons:

  • The Danish company in question is actually exempt from the filing obligation but has erroneously elected in its tax return that it should file the documentation, or
  • the Danish company is indeed subject to the filing obligation but has not submitted transfer pricing documentation in time.

If there is an error, the Tax Agency's letter provides a very short period to rectify the election in the tax return to avoid any penalties.

Thus, Danish companies may well want to check their digital mailboxes (in Danish: digitale postkasse) for any such letter from the Danish Tax Agency.

Penalties for late submission

If transfer pricing documentation is not submitted in time, the Danish Tax Agency will issue a fine, normally fixed at DKK 250,000 (approx. EUR 34,000). The fine may be reduced to DKK 125,000 (approx. EUR 17,000) if the documentation is subsequently filed. The fine is maintained even if the documentation subsequently produced gives no grounds for carrying out a transfer pricing adjustment.

If an audit results in subsequent transfer pricing adjustments, the fine will be increased by 10% of any increase to the company's taxable income.

See also our previous newsletter about transfer pricing.

Originally published by 30 January, 2023

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.