Danish Tax Reform: Simplified Transfer Pricing Rules and Reduced Documentation Burden

Today, the Danish Parliament passed an Act amending Sections 39 and 40 of the Tax Control Act to ease transfer pricing compliance for Danish taxpayers. This Act is expected to exempt at least 1,500 companies that submitted documentation for fiscal year 2022, and the transfer pricing rules under the Act will apply for income year 2025.

New Thresholds and Exemptions under the Act:

Changes to Section 39, subsections 1 and 2, introduce thresholds that exempt taxpayers from documentation requirements if controlled transactions are below DKK 5 million and intra-group receivables and debts are below DKK 50 million.

For those still subject to documentation requirements, the Act exempts certain controlled transactions, including dividends, capital contributions, minor passive investments, and other insignificant transactions. However, transactions under Section 40 of the Danish Depreciation and Amortisation Act and transactions with non-EU/EEA countries without a double taxation agreement with Denmark remain subject to documentation.

New thresholds for turnover and balance (but not FTE)

Section 40, subsection 1, of the Act raises the annual total balance threshold from DKK 125 million to DKK 195 million and the turnover threshold from DKK 250 million to DKK 391 million. The full-time equivalent (FTE) threshold remains unchanged.

No more auditor statements

The Act removes the Danish Tax Agency's authority to request auditor statements under Sections 43-45. Consequently, the Agency cannot make discretionary assessments or impose penalties under Section 84, number 5, for failing to submit an auditor statement.

Automatic extension of the documentation deadline

The Act also introduces an automatic extension of the deadline for submitting the transfer pricing documentation (the 60-days deadline) if an extension is granted for the corporate tax return deadline. As a result, there will no longer be a need for applying separately for extensions of both the corporate tax return deadline and the transfer pricing deadline.