Denmark: Enhanced transfer pricing reporting requirements, controlled transactions

Denmark: Transfer pricing reporting requirements

The Danish tax authorities (SKAT) announced enhanced reporting requirements for disclosing information about “controlled transactions,” thus reflecting a significant increase in the level of detail of information required regarding certain transactions with related counterparties.

Related content

For tax returns for financial year 2014 and later, all controlled transactions must be reported indicating the amount of the transaction; the type of transaction; and the country category (e.g., Denmark, the European Union, the European Economic Area (EU/EEA) and treaty-partner countries) where the counterparty to the relevant transaction is located.

New requirements

Controlled transactions are now an integrated part of the corporate tax return, if the total amount of the controlled transactions exceeds 5 million DKK (approximately U.S. $750,000).

The new disclosure requirements specifically define the transaction types—e.g., goods, services, leases, intangible assets, financial items, contributions, and other income/expenses.

As another new requirement, the actual amount of the transaction must be reported per transaction type. The amount of the transactions can be rounded—for example, goods sold for over 1 million DKK (approximately $150,000), the amounts may be rounded to nearest million; amounts below 1 million DKK may be rounded to nearest 100,000 DKK; amounts less than 100,000 DKK (approximately $15,000) but at least 1,000 DKK may be rounded to nearest 1,000 DKK; and amounts for transactions of a total of 0 DKK must be reported as zero (“0”).

For each type of transaction, the Danish entity must list the counterparty to the transaction under one of the following country or region categories:

  • Denmark
  • EU / EEA
  • Countries outside of the EU/EEA and with which Denmark has a “transfer pricing” income tax treaty  
  • Countries outside of EU/EEA and with which Denmark does not have a transfer pricing income tax treaty

For the group's total transactions, the requirements direct the taxpayer to disclose the exact total number of entities that fall within the following country or region categories:

  • Denmark
  • Other EU / EEA countries
  • Other EU / EEA countries including permanent establishments in the country
  • Countries outside EU / EEA and with which Denmark has an income tax treaty
  • Countries outside EU / EEA and with which Denmark has an income tax treaty including permanent establishments in the country
  • Countries outside EU / EEA and with which Denmark does not have an income tax treaty
  • Countries outside EU / EEA and with which Denmark does not have an income tax treaty including permanent establishments in the country

KPMG observation

With these changes, it appears the tax authorities expect that a multinational entity would be able to accurately disclose the classification of counterparties and the amounts for each type of transaction. However, information at this level is rarely readily available. Therefore, it is anticipated that this new requirement will increase the compliance burden on taxpayers.

 

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

Martin Nielsen | +1 45 5374 7055 | martin.nielsen@kpmg.com

Henrik Lund | +1 45 5374 7066 | henrik.lund@kpmg.com

Simon K. Schaadt | +1 45 5374 7044 | simon.schaadt@kpmg.com

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