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Annual Report Conveys Stricter TP Approach
Taxand Denmark discusses the annual report and the effect it will have on multinationals.
The report shows that in 67 cases SKAT have increased the taxable income of taxpayers subjected to a transfer pricing control, compared to 47 cases in 2011 and only 27 in 2008. In 2012 the increased focus on transfer pricing cases has resulted in more than EUR 2.8 billion of potential extra tax revenue, compared to EUR 0.8 billion in 2011.
In particular, SKAT's focus on controlling the way in which the prices and terms of controlled transactions concerning sale and lease of intangible assets have been determined has resulted in significant adjustments. SKAT has been focusing on the pricing of intangibles in connection with group internal restructurings and outsourcing.
The number of closed cases regarding requests from national or foreign taxpayers for elimination of double taxation under the Mutual Agreements Procedure and the so-called Advanced Pricing Agreements has not increased correspondently.
With the legislative amendments adopted in 2012, Denmark probably has one of the strictest approaches to transfer pricing in the world, including elaborate rules on transfer pricing documentation, sizeable monetary penalties for failure to comply and a provision that enables SKAT to request from certain taxpayers that they obtain an independent auditor's statement on the quality of its transfer pricing documentation.
Considering SKAT's increased focus on the transfer pricing area, as well as the strict Danish transfer pricing rules, it is essential for all groups with cross-border controlled transactions involving Denmark to prepare thorough documentation complying with the Danish requirements.