Worldwide transfer pricing reference guide 2014

Denmark (continued)
Documentation requirements (continued)
The transfer pricing documentation requirements include both domestic and foreign intercompany transactions. Under certain
circumstances, the transfer pricing documentation requirements are reduced for small and medium-sized companies (companies that are
classified according to thresholds measured at group level).
The documentation requirements were tightened as of 2006. According to the Executive Order on Transfer Pricing Documentation, the
documentation must include:
• A description of the group, including the legal group structure, the history of the group, including a description of restructurings,
operational structure and primary business activities, as well as a description of the industry in which it operates
• A description of the Danish entity, its intercompany transactions and the other entities involved (primary business activities and three
years’ key financials for all entities involved)
• A description of each intercompany transaction including:
• Parties, types of products/services/assets transferred and the volumes involved
• An analysis of functions and risks undertaken and assets employed by the entities involved
• Contractual terms
• Economic conditions
• Business strategies
• Comparability analysis for each intercompany transaction, including:
• Information about the transfer pricing policy and method applied, and how the transfer pricing principles are implemented in practice
(e.g., whether year-end adjustments are made)
• An analysis of how the transfer prices satisfy the arm’s length principle
• A list of any written intercompany agreements entered into by the Danish entity and a copy of any written agreements in place with
foreign tax authorities regarding transfer prices
Upon request from the tax authorities, a taxpayer is required to provide a benchmark study as part of the transfer pricing analysis within
60 to 90 days. As of August 2009, additional documentation guidelines are applicable to the valuation of companies/businesses, shares
and intangible assets/IP in a related party context.
In addition to the new penalty rules, the Parliament also adopted new rules allowing the tax authorities to request entities, subjected
to the transfer pricing documentation requirements to obtain an auditor’s report under special circumstances. The auditor’s report
must state that the auditor has not, during the audit, become aware of any matters giving rise to a conclusion that the transfer pricing
documentation i) does not give a true and fair view of the controlled transactions, ii) does not meet the documentation requirements, or
iii) is not in accordance with the arm’s length principle.
The tax authorities can request an auditor’s report from the company, if the company has had either:
• Controlled transactions with entities in countries outside the EU and EEA with which Denmark has not concluded a tax treaty
(low-tax countries), or
• An average operating loss for the past four year period according to the annual report — measured as the profit/loss before net
financials, extraordinary items and tax (EBIT)
By measuring the average operating loss over a four year period, loss-making companies are prevented from recording a small profit in
one year to get out of the rule.
Further, it is a condition that the request for an auditor’s report by the tax authorities is an appropriate and relevant control measure.
Auditor’s reports are expected to be requested only in a relatively limited number of instances every year.
An auditor’s report cannot be prepared by the auditor who audits the entity’s financial statements or contributes to drafting its transfer
pricing documentation.
The company will have minimum 90 days to prepare the auditor’s report. The expenses related to the auditor’s report must be borne by
the company itself.
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