The Eastern High Court (Østre Landsret), in a landmark transfer pricing case, issued a decision in the taxpayer’s favour. The high court, however, also interpreted the Danish statutory measure concerning the date when transfer pricing documentation must be prepared, and the court’s decision has immediate compliance implications for companies operating in Denmark.
The case identifying number is: B-2008-16 (28 March 2018). Read a release (Danish) from the high court.
The Danish tax authorities historically were understood to expect that taxpayers had to prepare their statutory transfer pricing documentation contemporaneously. The decision in the March 2018 case highlights that the high court supports this interpretation of the transfer pricing documentation rules. While submission of the transfer pricing documentation is only upon request by the tax authorities (that is, 60 days after a request is made of the taxpayer), the taxpayer must finalise the transfer pricing documentation by the filing date of the tax return for the respective tax year.
Those who follow legislative developments in Denmark will not be surprised by the court’s decision. Earlier this year, the Danish law was amended, leaving no doubt that going forward, taxpayers must finalise their transfer pricing documentation no later than the date on which they file their tax return for the financial year in question. The measure under the new law is effective for financial years beginning 1 January 2018 or later. The decision in this case, however, confirms that contemporaneous preparation was also a requirement for transfer pricing documentation in the past.
Accordingly, the 2017 documentation must be finalised no later than the filing date of the tax return—that is, 30 June 2018 for most companies.
It has been observed that the court’s decision will give the Danish tax authorities more ammunition to challenge transfer pricing matters, if the documentation is not timely prepared. As such, the court’s decision highlights the importance of finalising transfer pricing documentation in a timely manner in order to reduce the scope for potential disputes with the tax authorities. Furthermore, it stresses the importance of having thorough and complete transfer pricing documentation in place.
Therefore, taxpayers will use the court’s decision as an opportunity to evaluate potential implications with respect to their transfer pricing compliance status for open years (five years, back) and thus assess risks, reduce uncertainties, and establish a thorough transfer pricing documentation as well as an effective preparation process.
For more information, contact a transfer pricing professional with KPMG Acor Tax* in Denmark:
Henrik Lund | +45 5374 7066 | email@example.com
Johnny Bøgebjerg | +45 5374 7090 | firstname.lastname@example.org
*KPMG Acor Tax was an advisor to the taxpayer in the high court case, B-2008-16.
© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.