Worldwide transfer pricing reference guide 2014

Denmark (continued)
Documentation deadlines
A company subject to the documentation requirement is required to submit Form 05.021 on controlled transactions together with the
tax return.
The transfer pricing documentation for a particular income year should be prepared at the time when the tax return is submitted. The
tax authorities can request the taxpayer to submit the transfer pricing documentation with a 60 days’ notice. The earliest date when
such a request can be made is the filing date of a company’s tax return. In the past, the documentation requirements were met if it was
prepared within 60 days of the request from the tax authorities. However, recent argumentation by the tax authorities indicate that the
rules shall be interpreted such that the taxpayer is obligated to prepare contemporaneous documentation; i.e., it is understood that the
documentation should be prepared as a part of tax returns each year. This interpretation, at this point in time, is not supported by
case law.
Statute of limitations on transfer pricing assessments
The statute of limitations for a transfer pricing assessment is 1 May, in the sixth year after the end of the calendar year following the
income year.
Return disclosures/related party disclosures
Form 05.021 (05.022 — English version) discloses information on all controlled transactions and whether or not the company qualifies
for reduced documentation requirements.
Transfer pricing-specific returns
Not applicable, please refer to the “return disclosures/related party disclosures” section above.
Audit risk/transfer pricing scrutiny
The risk of a general tax audit can be characterized as moderate. As the majority of audits carried out in Denmark are transfer pricing
audits, the risk of transfer pricing being scrutinized during an audit is high. The likelihood that the transfer pricing methodology will be
challenged is also high.
Dedicated transfer pricing audit centers across Denmark are operated by the tax authority with the single purpose of carrying out
transfer pricing audits independently of general tax audits. The government has launched new initiatives with a focus on MNEs, including
increasing the funds allocated to the tax authorities, and tightening the penalty rules in transfer pricing cases. The tax authority’s focus
is especially on MNEs with the following matters:
• MNEs that either break even or are loss making
• Transfer of business or intangibles/restructurings
• Transactions with perceived low tax jurisdictions
• Transactions with non-treaty partners
• Financial transactions
• Intergroup services
The transfer of business/intangibles out of Denmark is a key target for the tax authorities. In line with this focus, the tax authorities
issued guidelines in 2009, on the valuation methods and documentation requirements applicable to companies/businesses, shares and
intangible assets/IP in a related party context.
Most tax audits not only include, but are being initiated with, requests related to transfer pricing review. Intensified cooperation between
the Nordic (Denmark, Sweden, Norway, Iceland and Finland) tax authorities has led to a higher level of information sharing and a
significant increase in the number of coordinated intra-Nordic audits.
APA opportunity
The Danish legislation provides for both unilateral and bilateral APAs. There is no APA regime in place, but the tax authorities enter into
five to seven bilateral APAs annually. At this point, all applications for APAs have been accepted.
We expect an increase in the number of APAs that will be initiated and finalized in the next few years.
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