Global transfer pricing guide

Transfer pricing - Denmark

01 Jan 202510 min read
This publication provides a high-level overview of Denmark's transfer pricing rules and outlines who to contact for expert guidance in this area.
Contents

Introduction to transfer pricing in Denmark

  • The Tax Assessment Act, section 2, contains the Danish arm’s length provision, which is interpreted in accordance with Article 9 of the OECD Model Tax Convention and the OECD Transfer Pricing Guidelines.

  • Under the Tax Administration Act, section 26, the statute of limitations for tax assessments concerning controlled transactions expires on 1 May in the sixth year after the end of the financial year.

  • According to the Tax Control Act, section 38, taxpayers (companies and permanent establishments) must disclose certain information about their controlled transactions in their tax returns.

  • According to the Tax Control Act, sections 37-52, taxpayers must prepare transfer pricing documentation for controlled transactions.

  • Taxpayers in small groups below the size thresholds of 250 employees and either a consolidated balance sheet total of EUR 26,200,000 (DKK 195,000,000) or consolidated turnover of more than EUR 52,400,000 (DKK 391,000,000) are required to file transfer pricing documentation only upon request from the Danish Tax Agency (DTA).

  • Taxpayers in large groups that exceed the size thresholds must submit transfer pricing documentation to the DTA annually, within 60 days after filing the tax return.

  • Failure to comply with the filing requirement is penalized with a fine of EUR 34,000 (DKK 250,000) per taxpayer per year, plus an additional amount equal to 10% of any income adjustments related to non-compliance with the arm’s length principle for the relevant year. Furthermore, where a tax assessment is issued, the burden of proof shifts to the taxpayer if the transfer pricing documentation has not been submitted in time.

  • For taxpayers in groups with consolidated turnover of EUR 750,000,000 (DKK 5,600,000,000) or more, a Country-by-Country Report (CbCR) must be submitted no later than 12 months after the last day of the fiscal year reported.

    * Note that for financial years prior to 2025, the group-level size thresholds were 250 employees and either a consolidated balance sheet total of DKK 125,000,000 or a consolidated turnover of DKK 250,000,000.

  • The arm’s length principle in section 2 of the Danish Tax Assessment Act is interpreted in accordance with Article 9 of the OECD Model Tax Convention and the OECD Transfer Pricing Guidelines.

  • For permanent establishments, section 2 of the Tax Assessment Act is interpreted in accordance with Article 7 of the OECD Model Tax Convention, the OECD Transfer Pricing Guidelines, and the OECD AOA.
  • The most appropriate transfer pricing method is selected based on the transaction in question, the functional analysis of the parties involved in the transaction, and the availability of comparable data.

  • The five OECD methods - comparable uncontrolled price method (CUP), resale price method (RPM), cost-plus method, transactional net margin method (TNMM), and profit split method (PSM or RPSM) - are all used in Denmark.

  • Other methods can also be used if justifiable and appropriate, but this is not recommended.

  • In practice, the TNMM is often used for transactions involving limited risk and no ownership of unique and valuable intangible assets.
     
  • The cost-plus method is most often used for contract manufacturing and intra-group services.

  • The RPM is used on occasion for distribution activities.

  • The CUP method is most often used for the pricing of commodities, royalties, and interest rates, but also in situations where internal CUPs are available.

  • For transfers of ongoing businesses and intangibles, valuation techniques are commonly used by the DTA.

Transfer pricing documentation

  • In Denmark, transfer pricing documentation comprises three files: local file, master file, and the CbCR.

  • The Danish minimum requirements for all three files follow the OECD Transfer Pricing Guidelines, Chapter V and the related Annexes.

  • The documentation must be prepared by the taxpayer on an ongoing basis. The deadline for submitting the documentation is 60 days after filing the tax return. For calendar-year companies, the tax return is filed at the end of June in the year following the financial year, and the deadline for filing transfer pricing documentation is therefore the end of August.

  • Annual filing of both a master file and a local file is mandatory for taxpayers that are part of a group with 250 employees or more and either a consolidated balance sheet total of EUR 26,200,000 (DKK 195,000,000) or consolidated turnover of more than EUR 52,400,000 (DKK 391,000,000).

  • In some cases, documentation is not required where the combined amount of all the taxpayer’s-controlled transactions is below EUR 670,000 (DKK 5,000,000) and the combined amounts of controlled receivables and debt are below EUR 6,700,000 (DKK 50,000,000).

  • Danish taxpayers that are either the ultimate parent company or the surrogate parent entity of a multinational group must submit a Country-by-Country Report (CbCR) to the DTA for financial years where the group’s consolidated turnover exceeded EUR 750,000,000 (DKK 5,600,000,000) in the income year prior to the reporting year. The CbCR must be submitted no later than 12 months after the last day of the fiscal year reported.
  • The Danish requirements for the content of the transfer pricing documentation are aligned with the OECD requirements as described in Chapter V of the OECD Transfer Pricing Guidelines. The documentation can be submitted in Danish, Norwegian, Swedish, or English.
  • Business restructurings and transfers of intangible assets;

  • Transactions with related parties in low tax jurisdictions;

  • Interest rates on intra-group loans and cash pools;

  • Royalty and license payments;

  • Conversions of fully fledged businesses to limited risk entities following acquisitions;

  • Significant changes in income or expenses;

  • Continuous or persistent losses.
  • The DTA issues fines if a taxpayer has filed wrongful or misleading information concerning controlled transactions in the tax return.

  • The fine is the higher amount of:
    • 0.5% of turnover up to EUR 67,000,000 (DKK 500,000,000), 0.1% of the amount between EUR 67,000,000 and EUR 134,000,000 (DKK 1,000,000,000), and 0.05% of turnover over EUR 134,000,000 (DKK 1,000,000,000) (no cap); or

    • EUR 33,500 (DKK 250,000) for a company with up to 50 employees, which increases by EUR 33,500 (DKK 250,000) for every 50 employees in the company up to 500 employees. In companies with more than 500 employees, the penalty under this calculation will be EUR 335,000 (DKK 2,500,000).
  • The DTA also issues fines for late filing of transfer pricing documentation, or for filing documentation that is wholly insufficient.
    The fine for non-compliance with Danish transfer pricing documentation requirements is:
    • an initial amount of EUR 34,000 (DKK 250,000) for not submitting adequate transfer pricing documentation within the 60-day period following submission of the tax return; and

    • an additional amount of up to 10% on any adjustment to the taxable income (if the initial penalty has been triggered).
  • The initial amount of EUR 34,000 (DKK 250,000) may, in some cases, be reduced to EUR 17,000 (DKK 125,000) if a compliant transfer pricing documentation package for the relevant year is submitted later.

  • Where a taxpayer has not filed the mandatory transfer pricing documentation before the deadline, the burden of proof with regard to the arm’s length pricing of the controlled transactions shifts from the DTA to the taxpayer, irrespective of a later filing of the documentation.

Economic analysis and how to demonstrate an arm’s length result

  • Danish transfer pricing rules are applied in accordance with the OECD Transfer Pricing Guidelines. The pricing of controlled transactions is based on the nine-step comparability analysis described in Chapter III of the Guidelines: functional analysis, choice of method and financial indicator, tested party, comparables, comparability adjustments, etc.

  • Where benchmarks are used to price-controlled transactions, the DTA typically prefers pan-European comparables. In some situations, reliable comparables from other jurisdictions will also be accepted. Generally, the interquartile range is used to determine an arm’s length range, and if the pricing falls outside this range, an adjustment is usually made to the median.

  • For low value-adding services, benchmarks are usually not required. Taxpayers can rely on the guidance provided in Chapter VII of the OECD Transfer Pricing Guidelines for low value-adding intra-group services (LVAS).

  • For the pricing of transfers of intangible assets and ongoing businesses, the DTA uses various valuation techniques, such as discounted cash flow and excess earnings models, the acquisition price method, and multiples.

  • For loans, the arm’s length interest rate is typically determined based on interbank rates, plus a margin based on the borrower’s credit rating. Internal CUPs are also taken into consideration where they exist.

  • Royalties and license payments are tested using various methods depending on the facts and circumstances of the transaction.

Advance Pricing Agreements (APAs), dispute avoidance and resolution

  • Advance Pricing Arrangements (APAs) are mutual agreements between the competent authorities of two or more jurisdictions, covering the pricing of cross-border intra-group transactions going forward. The procedure is initiated by the taxpayer by sending a written application to the Danish Competent Authority.

  • Taxpayers applying for an APA will need to provide the information necessary for the procedure to be initiated and follow up with additional information as requested by the competent authorities.

  • In general, only bilateral and multilateral APAs are accepted in Denmark.

  • Unlike many other countries, Denmark does not charge a fee for APAs. Denmark also has an extensive treaty network. Thus, the APA regime is often used to obtain tax certainty and avoid double taxation going forward.

  • Reopening of the Danish tax return following a foreign tax assessment resulting from adjustment of the pricing of controlled transactions relating to a Danish taxpayer is time-barred under the Tax Administration Act, section 26, on 1 May in the sixth year after the end of the financial year.

  • However, when information is received regarding a foreign assessment after expiry of the six-year time bar, it is possible to reopen the tax return if the taxpayer files a request with the DTA within six months after receiving information regarding the foreign assessment.

  • If the DTA disagrees with the foreign transfer pricing adjustment, a Mutual Agreement Procedure (MAP) can be initiated on request from the taxpayer where there is a double taxation treaty with the foreign Jurisdiction.

Exemptions

  • In Denmark, all controlled transactions must be priced in accordance with the arm’s length principle, and the pricing must be documented either on a mandatory basis or on request from the DTA.

  • There are three exceptions to the mandatory filing of transfer pricing documentation:
    • If the controlled transactions are purely domestic (Danish to Danish) with certain carveouts regarding transactions between related parties covered by different tax regimes.

    • If the combined amount of the taxpayer’s controlled transactions is below EUR 670,000 (DKK 5,000,000) and the combined amounts of the taxpayer’s controlled receivables and debt are less than EUR 6,700,000 (DKK 50,000,000), unless there are transactions relating to intangible assets (goodwill, know-how, patents, etc.), or the other party to the transaction is domiciled in a foreign jurisdiction not required to exchange information with the DTA.

    • If the taxpayer is part of a group that does not meet the size thresholds of 250 employees and either a consolidated balance sheet total of EUR 26,200,000 (DKK 195,000,000) or consolidated turnover of more than EUR 52,400,000 (DKK 391,000,000), transfer pricing documentation must be prepared and filed only on request by the DTA, unless the other party to the transaction is: (i) a natural or legal person domiciled in a foreign state that does not have a double taxation treaty with Denmark and is not a member of the EU or the EEA; (ii) a permanent establishment domiciled in a foreign state that does not have a double taxation treaty with Denmark and is not a member of the EU or the EEA; or (iii) a permanent establishment domiciled in Denmark where the taxpayer is domiciled in a foreign state that does not have a double taxation treaty with Denmark and is not a member of the EU or the EEA.

Contact us

For further information on transfer pricing in Denmark please contact:

Esben Lykke Jensen      
Transfer Pricing Director

T+4535275216

E esben.l.jensen@dk.gt.com

David Shaughnessy
Transfer Pricing Manager

T+4532427912

E david.shaughnessy@dk.gt.com

Prabhleen Bawa
Transfer Pricing Manager

T+4535275065

E prabhleen.bawa@dk.gt.com

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