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02 May 2022

Denmark introduces new filing requirements for transfer pricing documentation

Denmark recently introduced a requirement to pro-actively submit transfer pricing documentation (TPD) annually to the Danish tax authorities. Failure to submit within the applicable deadline will likely result in automatic financial penalties. Most companies within scope will need to submit their financial year (FY) 2021 TPD by 29 August 2022.

Summary of Legislation

For financial years starting on or after 1 January 2021, new legislation requires TPD to be submitted annually. The deadline for submitting compliant documentation is 60 days after the due date for the filing of the annual corporate income tax return. Therefore, for financial years ended on 31 December 2021, the deadline for submission of FY21 TPD will be 29 August 2022.

Under the new rules, taxpayers subject to TPD requirements are obliged to submit both the entity specific local file and group-wide master file (including appendices as applicable) annually.

However, it is recognized that in certain situations multinational groups are not able to finalize the master file in time to meet the deadline. Therefore, it is possible to request an extension of the master file submission deadline and/or to use the master file prepared for the previous financial year as a temporary document if certain requirements are met.

Entities in scope

The TPD requirement applies to all Danish entities and permanent establishments of Groups which (measured on a global Group consolidated level) meet one of the following two thresholds:

  • Have more than 250 employees
  • Have more than DKK125 million in assets and more than DKK250 million in revenue

If one of the above criteria is met when measured on a Group consolidated basis, then the Danish entity (or permanent establishment) falls within scope of these rules.

Potential penalties for non-compliance

As a starting point, the penalty for non-compliance is DKK250,000 (approx. €33,500) per legal entity, per year. It is anticipated that this penalty will be imposed automatically on the entities that do not meet the deadline for the pro-active submission of the TPD. Additionally, a penalty of 10% may be imposed on a potential income adjustment.

It is not clear at this stage what will be the practicalities associated with the submissions of the relevant documents.

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For additional information with respect to this Alert, please contact the following:

EY Godkendt Revisionspartnerselskab, Transfer Pricing

Document ID: 2022-0707

 

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