New stricter rules about filing of TP-documentation

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The Danish Parliament has passed L 28 (2020/21) and thus changed the requirements to when filing must be made of Transfer Pricing (TP)-documentation. With effect from and including the income year 2021, TP-documentation must be filed annually to the Danish Tax Agency if you are covered by the rules.

With the passing of L 28 (2020/21) the requirements for filing of Transfer Pricing documentation(TP-documentation) have been seriously tightened.

Now, there are requirements that companies covered by the rules about preparation of TP-documentation must file TP-documentation no later than 60 days after the information deadline. Previously, documentation was only to be filed upon request from the Danish Tax Agency.

This means that by filing of the information form for the income year 2021 (calendar year accounts) on 30 June 2022, then filing of TP-documentation must be filed to the Danish Tax Agency no later than 60 days after (i.e., on 29 August 2022). However, companies that have already started the income year 2021 should not file the documentation until from and including the income year 2022.

If the prepared TP-documentation is not filed on time – or if the TP-documentation is not prepared at all – then the Danish Tax Agency is at the same time authorized to make discretionary assessments.

It is subject to the requirements to submit TP documentation if the group meets one of the following three conditions:

  1. has 250 or more employees,
  2. or has
    • a yearly total balance of DKK 125 million or more,
    • and has a yearly turnover of DKK 250 million or more.
  3. has controlled transactions with entities located in tax havens.

Besides foreign companies and transactions abroad, TP-documentation also includes Danish companies and transactions in Denmark.

TP-documentation must include information that makes it possible to form basis of an assessment of whether prices and terms in relation to internal transactions are determined in accordance with the arm’s length principle and thus, in accordance with the prices and terms that would be determined if the transactions had been concluded between independent parties. The requirements for the detailed content of TP-documentation appears from the executive order no. 1297 of 31 October 2018 about documentation of pricing of controlled transactions.

Fines may be imposed on the group if the documentation is filed late, is incomplete, or not filed at all. The fine is DKK 250,000 + 10% of the discretionary assessments if no documentation is prepared or filed. If the documentation is filed after the deadline, and the documentation meets the requirements for sufficient documentation, the fine may be reduced to DKK 125,000.  

It is therefore our recommendation that the prepared documentation is checked now to make sure that the TP-documentation is updated and ready for filing to the Danish Tax Agency.