The Danish tax authorities (SKAT) on 30 August 2017 published the annual report of transfer pricing statistics, trends, and forecast.
The 2016 report (Danish) [PDF 650 KB] reveals an all-time record of downward income adjustments.
A comparison of information from the SKAT report for 2015 to the information for 2016 [last year´s figures are shown below in brackets] reveals:
During 2016, the cases resulting in upward adjustments were primarily about the pricing of intra-group goods transactions and services, financial transactions, and intangible assets. The largest adjustments still relate to the transfer and use of intangible assets.
At year-end, 29  of the pending MAP cases were put "on hold" because the cases were in litigation process—i.e., the cases were awaiting a decision by the Danish national tax tribunal, a higher appeals body in Denmark, or a foreign court, before the processing of the MAP cases can commence.
In 2016, SKAT launched an initiative to test a new conflict resolution model to provide greater momentum in pending cases and to avoid long proceedings. Inspired by the experiences of the UK "alternative dispute resolution" mechanism, SKAT sought to establish a similar model with internal mediators.
Consequently, 12 internal mediators were trained in the same model and principles and with the same teachers as in the UK. Given the timing of the training, the results of the new initiative and its effects on pending cases will not show until 2017 or 2018.
The historical level for downward income adjustments, that presumably are mostly related to SKAT’s own income adjustments from previous years, are generally (with a one-year exception) less than DKK 1 billion per year. The extremely high level of downward income adjustments for 2016 can be viewed as good news for taxpayers exposed to the risk of double taxation.
The amount of downward adjustments for 2016 is significantly higher than the upward adjustments for the year. The upward adjustments appear to have found a more steady level. The adjustments for 2015 and 2016 generally have been lower than the three previous years (2012 to 2014). However, in particular, the statistics for the years 2012-2014 were characterized by a few large cases related to adjustments of intangible assets. Overall, transfer pricing professionals believe that the structural level of transfer pricing adjustments is closer to that for 2015 and 2016 than the level for the previous three years.
The high (increased) number of tax audits and an apparently steady level of large amounts of income adjustments in 2016 primarily reflect a continued and clear focus of the Danish tax authorities with respect to transfer pricing matters in Denmark. Based on the historical trends and the political interest for transfer pricing in Denmark, combined with implementation of the OECD action plans on base erosion and profit shifting (BEPS), it does not seem that the current level of tax audits or adjustments would be likely to decline in the near future. The record high level of downward income adjustments could, in the light of the reputedly aggressive Danish transfer pricing assessments completed in the past, indicate an improved management of on-going MAP cases. This could be interpreted as a reduction of the risk of double taxation related to Danish matters.
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:
Simon K. Schaadt | +45 5374 7044 | email@example.com
Martin Nielsen | +45 5374 7055 | firstname.lastname@example.org
Henrik Lund | +45 5374 7066 | email@example.com
Johnny Bøgebjerg | +45 5374 7090 | firstname.lastname@example.org
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.