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Danish transfer pricing cases still increasing
In 2013 the Danish tax authorities raised a record number of transfer pricing cases which led to initial transfer pricing corrections of approximately 17 billion DKK. It remains an open question as to which extent these increases will stand the test of the courts. Taxand Denmark investigates the rise in transfer pricing cases and what is behind the trend.
Since 2009, the Danish tax authorities have intensified their work on identifying intra-group transactions which are not made with respect of the arm’s length principle.
The Danish tax authorities made transfer pricing corrections in 77 cases in 2013, which is the highest number of transfer pricing corrections in 1 year and 10 more than the year before.
8.7 billion, 15.3 billion, 6.3 billion, 6.2 billion, 21.2 billion and 17.3 billion DKK are the amounts of transfer pricing corrections that the Danish tax authorities have made each year since 2008.
It is specifically transfer pricing trades with intangible assets which both the tax authorities and corporates find most problematic.
Whilst the Danish tax authorities think they are improving at identifying the most problematic transfer pricing issues, corporates and critics on the other hand see these trades with intangible assets as extremely complicated and believe they are acting within the remit of the law.
The tax authorities recognise this problem and have, for the past few years, worked with a tax governance concept which enables the tax authorities to cooperate with the bigger companies and work closely on specific problems relating to all tax matters. With this concept the tax authorities are looking to create openness and minimise any tax liabilities which later could occur between companies and the tax department.
Also published in Thomson Reuters' Taxnet Pro, 25 April 2014
The Danish tax authorities continue with their aggressive approach on transfer pricing and high-ranking Danish tax officials have stated that they find a success ratio of 50% in the cases they pursue to be satisfactory, however this statement is questionnable. It seems more likely that a significant part of the transfer pricing corrections made by the Danish tax authorities will be rolled back when the cases reach the Danish tax tribunal and courts.