Denmark: Transfer pricing adjustment trends, forecast

Denmark: Transfer pricing adjustment trends, forecast

The Danish tax authorities (SKAT) have published a report of transfer pricing statistics for 2014.

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The 2014 report (Danish) [PDF 96 KB], released 11 March 2015, reveals a high number of cases with taxable income adjustments—totaling over DKK 20 billion (approximately € 2.68 billion) for 2014.

Transfer pricing adjustment trends

According to SKAT, total adjustments for years 2010-2014 increased by a significantly higher amount than for previous years.

  • For 2010 and 2011, the total amount of adjustments was approximately DKK 6 billion per year.
  • For 2012-2014, total adjustments were approximately DKK 20 billion per year—thus, indicating an increased focus by the tax authorities in this area.

For 2014, while upward adjustments accounted for more than DKK 20 billion (approximately € 2.68 billion) in 76 cases, SKAT had 16 cases in which downward adjustments accounted for DKK 5.4 billion (approximately € 0.72 billion). The high level of downward adjustments can been seen as indicating increased challenges of tax authorities in other countries, faced by SKAT.

Future focus

Throughout the year, SKAT continued its analysis of transfer pricing with a special focus on cases involving intangible assets (which constituted 28% of the cases and 38% of total adjustments in 2014), group financing, and loss-making companies. 

SKAT announced that for 2015, its efforts will focus on transfer pricing cases involving (1) goods and services, (2) intangibles, and (3) financial transactions.

Further, SKAT announced that for 2015, due to the complexity of setting and documenting transfer prices, the tax authorities will initiate cooperation with trade organisations and companies in order to improve the dialogue in this area and to enable tax inspectors within SKAT to have a better understanding of the position of taxpayer companies.

KPMG observation

Transfer pricing professionals from the KPMG member firm in Denmark, KPMG Acor Tax, have pointed out the high number of cases and large amount of adjustments from 2013 were also seen in 2014. This high level of cases and adjustments is viewed primarily as a result of continued political pressure for audits of Danish multinational companies, and may be viewed as an effort to present actual results to the Danish government. 

Based on the historical trends and the ever-growing political interest for transfer pricing in Denmark, combined with the increasing challenges from foreign tax authorities faced by SKAT as well as the on-going discussion of base erosion and profit shifting (BEPS), there does not appear to be any indication that the level of cases or adjustments will decline in the near future.

 

For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services group in Denmark, with KPMG Acor Tax:

Martin Nielsen |+ 45 5374 7055 | martin.nielsen@kpmg.com

Henrik Lund | +45 5374 7066 | henrik.lund@kpmg.com

Simon K. Schaadt | +45 5374 7066 | simon.schaadt@kpmg.com

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