On 12 September 2019, the Ministry of Taxes published a major bill on international taxation. The bill will be subjected to a public hearing and subsequently presented to the Danish Parliament. Interested parties can submit their comments by 10 October 2019 at the latest. The draft bill includes the following changes:
CFC taxation:
The draft bill intends to implement the CFC (Controlled foreign company) rules of the European Union’s (EU’s) Anti-tax Avoidance directive (Council directives (EU) 2016/1164 and (EU) 2017/952) (the ATAD) into Danish law. The proposed CFC rules apply if more than 1/3 of the annual income of the subsidiary is deemed CFC income, wherever the subsidiary is domiciled. The asset test is also abolished under the proposal.
Transfer pricing:
The draft bill proposed the following TP improvements:
- The transfer pricing documentation must be submitted to the tax authorities together with the annual corporate income tax return (generally due six months after year end).
- Transfer pricing penalties may be imposed if the TP documentation is not submitted together with the tax return.
- The tax authorities will be entitled to assess a taxpayer on an estimated basis for TP purposes if the TP documentation is not submitted by the required time, i.e., the burden of proof is reversed.
- The existing 60-day rule for submitting the TP documentation to the tax authorities is abolished.
Permanent establishment:
In order to amend the domestic PE definition the draft law also proposed a number of adjustments and clarifications in line with OECD BEPS Action 7.
The draft bill is planned to effective from 1 January 2020.
