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The calculation of fines in cases on missing or incomplete TP-documentation
Two new rulings seem to herald attenuation in fine calculation in cases where the transfer pricing documentation is not in accordance with the requirements. Taxand Denmark looks into this further.
Two new rulings, one from a district court and one from the Eastern High Court, give the impression that fines in cases regarding transfer pricing-documentation could be considerably smaller than previously thought. The rulings are the two first on fines for faulty TP documentation.
The rules on fine calculation for faulty transfer pricing-documentation
In the official comments to the bill (2004/2 LSF 120) it is stated that the fines should, in general, make sure that it is not advantages to avoid preparing the required transfer pricing- documentation. Therefore, the fines shall, in terms of size, be two times the cost of preparing the required documentation. Additionally, a company is fined based on how much its income is raised if it is found that dealings with other companies have not been conducted at arms-length terms.
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The rulings set the stage for an assessment of defensible situations – though this is not mentioned in either judgement – in which certain factors within the company can affect the outcome of a judgement. Therefore, it is wise to take every possible step to comply with the transfer pricingdocumentation requirements and cooperate fully with the Tax Authorities