On 13 September 2019, The Danish Ministry of Taxation announced the first draft bill regarding the submission of transfer pricing documentation. The new rules will require taxpayers to file the statutory transfer pricing documentation together with their annual tax returns.
Proposedly will the new rules be effective for tax years which start from January 1, 2021. If the bill is approved as expected, the transfer pricing documentation for income year 2021 must be submitted no later than 60 days after the tax return is submitted in 2022.
Briefly, the documentation is to be submitted by the tax return deadline, which differs from the previous rules. Danish companies must submit their transfer pricing documentation, which includes both domestic and foreign transactions, each year instead of upon the Tax Agency’s request. The new rules will affect companies which fill the requirements for filling a Master file or/and Local files in Denmark.
In the draft bill, we have noted two considerable changes compared to the current rules; change of submission and if the submission timeline is not attended, the Danish Tax Agency may estimate the taxable income. The decisive factor for whether the Tax Agency can make a discretionary assessment is whether sufficient documentation has been submitted at the time of the new submission deadline. As implied in the proposal, such assessment could be performed regardless of whether the taxpayer subsequently prepares additional documentation or not.
Not submitting the transfer pricing documentation as required could result in high penalties, approximately can a fee of DKK 250,000 be issued. The penalties are calculated per unit which do not meet the requirements.
Our comments
The bill is expected to be approved in its current form. Denmark is known as a country with strict transfer pricing legislation and high penalties, which makes it crucial for many companies to ensure compliance with the new rules. This is particularly important since these new rules are proposed to be applied shortly.
We would like to stress the fact that different requirements can apply in different jurisdictions, and it is therefore important to continuously ensure if any new rules are implemented or changed that can affect your obligations as a taxpayer.
If you need assistance with your transfer pricing documentation or have any other questions about how your company may be affected, please contact us and we will assist you to ensure your compliance with the new rules.
