Transfer pricing

All trading between undertakings in the same group must take place according to the arm’s length principle (which means that the price agreed must be the same as the price that would be agreed in a comparable transaction between two unrelated parties), and both subsidiaries and the parent company must be able to document this in transfer pricing documentation. The same applies between main shareholders and their companies, and between parties liable to pay tax and their permanent establishments.

The rules concerning written documentation and the disclosure obligation for controlled transactions can be found in Part 4 of the Danish Tax Control Act (Skattekontrolloven).

On this page you can read more about who, for income years starting on or after 1 January 2021, has to submit written documentation and when this documentation must be submitted.

You can also read about the full and limited documentation obligation - and you can find guidance on the correct preparation and submission of the documentation.

Transfer pricing concerns the pricing of controlled transactions. Controlled transactions are defined in section 37 para (6) of the Tax Control Act and are transactions between affiliated parties etc.

Controlled transactions are transactions between parties liable to pay tax, such as consolidated companies, or where one of the parties exercises control over the other party to the transaction, or where there is only one party liable to pay tax in connection with transactions between a head office and a permanent establishment.

In the calculation of the taxable income, the pricing of controlled transactions should be made according to the arm’s length principle. This means that prices and terms must be the same as the prices and terms that would be agreed in a comparable transaction between unrelated parties. See section 2 in Danish of the Danish Tax Assessment Act (Ligningsloven), which concerns:

Parties liable to pay tax

over whom natural or legal persons exercise control,
who exercise control over legal persons,
who are consolidated with a legal person,
who have a permanent establishment outside Denmark,
who are foreign natural or legal persons with a permanent establishment in Denmark, or
who are foreign natural or legal persons engaged in hydrocarbon-related business activities covered by section 21(1) or (4) of the Danish Hydrocarbon Tax Act (Kulbrinteskatteloven).

Parties liable to pay tax who are subject to the arm’s length principle in section 2 of the Tax Assessment Act must provide information on controlled transactions to the Danish Tax Agency. See section 38 of the Tax Control Act.

The same circle of tax-liable parties is subject to the arm’s length principle in section 2 of the Tax Assessment Act and to the disclosure obligation in section 38 of the Tax Control Act.

Parties liable to pay tax who are subject to section 38 of the Tax Control Act and who are not exempt under section 40(1) must prepare and retain written documentation (transfer pricing documentation) of such a nature as to provide the basis for assessing whether the prices and terms for controlled transactions have been determined in accordance with the prices and terms that could have been agreed in comparable transactions between unrelated parties, see subsections 2 and 4, however. See section 39, first sentence of the Tax Control Act.

For income years beginning on or after 1 January 2021, parties liable to pay tax that are subject to the transfer pricing documentation obligation must submit their written documentation to the Tax Agency within 60 days of the filing deadline for the tax return.

For previous income years, transfer pricing documentation should only be submitted if requested by the Tax Agency. You then have 60 days to submit the requested documentation. For previous income years, the documentation obligation concerns multiple controlled transactions, including controlled transactions between two Danish companies in a large group.

The documentation obligation concerns parties liable to pay tax who are subject to section 38 of the Tax Control Act and who are not exempt under section 40(1).

As a general rule, the documentation obligation does not apply to solely Danish national transactions, unless the parties to the transaction are not taxed under the same rules. This may be the case if one of the parties is taxed under the Danish Tonnage Tax Act (Tonnageskatteloven), the Hydrocarbon Tax Act, or the rules for cooperative societies. The documentation obligation also applies to transactions in which one party is a private limited company taxed under section 1(1) para (1) of the Danish Corporation Tax Act (Selskabsskatteloven), and the other party is an association taxed under section 1(1) para (6) of the Corporation Tax Act.

However, no written documentation (transfer pricing documentation) is required to be prepared for controlled transactions of insignificant scope and frequency. See section 39(2) of the Tax Control Act and the Danish Executive Order on Transfer Pricing Documentation (TP-dokumentationsbekendtgørelsen).

A foreign company or person with a permanent establishment in Denmark, and that is not exempt under section 40, is subject to the documentation obligation. It is the non-Danish company or person, and not the permanent establishment, that is liable to pay tax in Denmark, see section 2(1)(a) of the Corporation Tax Act and section 2(1) para (4) of the Danish Withholding Tax Act (Kildeskatteloven), and the documentation obligation therefore rests with the non-Danish company or person.

A limited documentation obligation applies to parties liable to pay tax who, alone or together with consolidated companies, have:

less than 250 employees and either
- a total annual balance sheet of less than DKK 125 million, or
- annual revenue of less than DKK 250 million.

For these parties liable to pay tax, the documentation obligation solely applies to controlled transactions with natural and legal persons, as well as permanent establishments registered in a non-EU/EEA country with which Denmark does not have a double taxation agreement that includes a provision concerning transfer pricing.

It is not necessary to submit the transfer pricing documentation at the same time as the tax return is filed. But it is recommend that you prepare the documents, with specification of unique names, before you submit the documentation.

Please note that the documentation should always be prepared on an ongoing basis and that separate documentation must be prepared for each year, since it is not possible to refer to multiannual documentation or to documentation for previous years.

It is possible to submit transfer pricing documentation before submitting the tax return. In such case, please contact the Tax Agency if there is no access to the transfer pricing module in TastSelv Selskabsskat (E-tax for corporation tax) (DIAS).

How the transfer pricing documentation is to be submitted depends on whether you are submitting documentation for a natural person or for a company etc.:

For income years beginning on or after 1 January 2021, the written documentation must be submitted within 60 days of the deadline for filing the tax return. At the request of the party liable to pay tax, the deadline may be extended in special circumstances. You must submit written documentation for controlled transactions:

if your business with a permanent establishment has 250 or more employees and either a total annual balance sheet of at least DKK 125 million, or annual revenue of at least DKK 250 million; and/or
if your permanent establishment is located in a non-EU/EEA country that does not have a double taxation agreement with Denmark that includes a provision concerning transfer pricing; and/or
if you have controlled transactions with a company registered in a non-EU/EEA country that does not have a double taxation agreement with Denmark that includes a provision concerning transfer pricing.

If you are to submit transfer pricing documentation for a natural person, you must contact the Tax Agency at kontrolleredetransaktioner@sktst.dk.

Please note that you must provide information about your controlled transactions to the Tax Agency. This applies irrespective of whether you are subject to the documentation obligation. As a result, you must always submit form 04.021 on controlled transactions (Danish only).

Companies subject to hydrocarbon tax which declare their taxable income using hydrocarbon forms from www.skat.dk must submit documentation via the transfer pricing module in TastSelv Selskabsskat (DIAS) by asking the Tax Agency for access to the transfer pricing module in TastSelv Selskabsskat (DIAS). Such request must be submitted to kulbrinte@sktst.dk.

Access to the transfer pricing module in TastSelv Selskabsskat (DIAS) solely gives access to submitting transfer pricing documentation. Companies subject to hydrocarbon tax must therefore still disclose controlled transactions by submitting form 05.022 - Controlled transactions, appendix to the tax return together with the hydrocarbon tax return.

You must submit the documentation via the transfer pricing module in TastSelv Selskabsskat (DIAS). You get access to the module after you have stated that the company is subject to the documentation obligation in the tax return.

Information concerning controlled transactions (disclosure obligation) must be provided electronically in the ‘Controlled transactions’ section of the company’s tax return in TastSelv Selskabsskat (DIAS).

A fine may be imposed if the party liable to pay tax - deliberately or through gross negligence - fails to declare or submit the documentation in due time. The fine is a basic amount of DKK 250,000. The fine may be reduced by half (to DKK 125,000) if the missing documentation is subsequently prepared in the required quality. The fine is increased by 10% of any increase in income due to non-fulfilment of the arm’s length principle. The Tax Agency may determine the taxable income relating to the controlled transactions on a discretionary basis if the party liable to pay tax has not prepared and submitted adequate transfer pricing documentation in due time.

If a party liable to pay tax deliberately or through gross negligence submits false or misleading information concerning fulfilment of the conditions to be subject to the limited documentation obligation, the party liable to pay tax will be fined.

Transfer pricing documentation consists of

joint documentation for the entire group; and
country-specific documentation for each group company liable to pay tax.

The documentation must include all the descriptions and analyses etc. described in the Executive Order on Transfer Pricing Documentation’s section 4 concerning the joint documentation and section 5 concerning the country-specific documentation.

The scope of the documentation will depend on the scope and complexity of the group, the business and the controlled transactions. See section 2(2) of the Executive Order on Transfer Pricing Documentation.

The documentation must serve as the basis for an assessment of whether the prices and terms agreed are the same as the prices and terms that would have been agreed in comparable transactions between two unrelated parties. See section 39(1) of the Tax Control Act and section 2(1) of the Executive Order on Transfer Pricing Documentation.

It is possible to submit multiple versions of the joint documentation and the country-specific documentation if, in the same income year, the party liable to pay tax has been part of various different controlled environments under section 39 of the Tax Control Act. In the system, the party liable to pay tax may declare to which periods the various versions of the documentation apply.

Under section 4 of the Executive Order on Transfer Pricing Documentation, the joint documentation must include:

A group chart showing the legal and organisational structure of the group, including specification of the countries in which the individual related parties operate
A general description of the group’s business activities
Details of the group’s intangible assets
Details of the group’s financial activities
Details of the group’s accounting and tax status

If - due to different time limits for the preparation of the joint documentation in the country where the joint documentation for the group is prepared - the joint documentation for the income year in question is not ready within the deadline for the submission of the transfer pricing documentation, the joint documentation for the previous income year may be submitted as preliminary joint documentation. This is assuming that the joint documentation is no more than one year old. On the submission of preliminary joint documentation, it must be stated when the joint documentation for the income year in question will be submitted andany significant changes concerning the Danish party liable to pay tax which are not stated in the country file must be described.

The documentation must be prepared on an ongoing basis and as a consequence, separate transfer pricing documentation must be prepared for each year. It will thus not be sufficient to prepare transfer pricing documentation covering several years, or to refer to transfer pricing documentation for previous years.

Under section 5 of the Executive Order on Transfer Pricing Documentation, the country-specific documentation must include:

A detailed description of the business
Detailed information, descriptions and analyses relating to the controlled transactions in which the business is involved
Records relating to the business’ economic, financial and accounting data

It should be noted that country-specific documentation must be prepared for each Danish party liable to pay tax. It is thus not possible to prepare a single general description of all the group’s Danish entities to serve as country-specific documentation.

If the country-specific documentation consists of several documents - for example, divided into different transactions - they must be combined into one document.

If the company is part of several circles, the naming of the documents must indicate the circle to which the documents relate, for example by naming the documents according to this model:

Periode_Kreds_Finansielle_Aktiviteter.docx. (Period_Circle_Financial_Activities)

All documentation must be submitted in an electronically readable format (for example a readable PDF document, or one of the following file types, CSV, TXT, DOCX and XLSX). If the attached appendices are not available in electronically readable formats, they may also be submitted as non-readable files (image files).

The rules concerning the disclosure and documentation obligations are described in the following sections of our Danish-language legal guide:

If you want to read any of the guidelines in full (in Danish), please click on the relevant guideline and then click on Vis udskrift (Display transcript).

If you would like to see previous - and outdated - versions of the guideline in Danish, please click on the guideline and then click Andre versioner af vejledningen (Other versions of this guideline).

Transfer pricing

Transfer pricing in brief

Change of rule for income years beginning on or after 1 January 2021

Who is subject to the written documentation obligation?

If you are subject to the documentation obligation

If no documentation is submitted

Documentation requirements

Guidelines and forms