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Transfer Pricing - A New Target Area for Denmark


The Danish tax authorities have announced that transfer pricing will be one of their target areas in 2010, especially in respect of taxpayers who have a zero effective tax rate and the valuation for transfers of intangible property. While specific steps had yet to be announced, the Danish tax minister published an action plan for tightening the Danish taxation of multinational companies in July 2010. This initiative is prompted by the recent publication of a survey showing that a substantial number of foreign (and Danish) multinational companies do not pay corporate income tax in Denmark. An imbalance in the internal transfer pricing of multinational companies has been mentioned as a possible cause. Taxand Denmark highlight the main areas of focus and what taxpayers need to prepare as a result of this move.

Among the focus areas are:

  • Increase transparency in regards to the tax matters of multinational companies
  • Possible introduction of certain accountant certification requirements in relation to loss making companies
  • A general service check of the Danish corporate taxation system
  • A test of the scope and application of the existing corporate tax rules

Simultaneously, greater control of the multinational companies' tax reporting is required, specifically relating to the companies' financing, interest deductions and thin- capitalisation. Another part of the plan focuses on a higher degree of specialisation within the Danish tax authorities. The Government will, during the autumn, seek to negotiate restrictions on the taxation of multinational companies.

Taxand's Take

Under Danish Transfer Pricing rules taxpayers are required to prepare and keep written documentation that:

1. Explains how the prices in inter-company transactions are determined
2. Provides the information necessary to determine if prices are at arm's length

Now is a good time to go through your transfer pricing systems to check if your transfer pricing documentation fulfils both requirements.

Your Taxand contact for further queries is:
Anders Oreby Hansen
T. +45 72 27 36 02

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