The Danish Ministry of Taxation has initiated a public consultation on the draft legislation to amend the Minimum Taxation Act, the Tax Assessment Act, the Corporate Tax Act, the Tax Administration Act, and the Tax Control Act on 3 February 2025.

The deadline for comments is 3 March 2025. The amendments are proposed to take effect on 1 July 2025.

The draft Act outlines the adoption of the OECD Pillar 2 administrative guidelines from June 2024 and January 2025 under the Minimum Taxation Act. It also includes several amendments to both the Minimum Taxation Act and the Danish Corporation Tax Act’s rules on international joint taxation, aiming to prevent unintended tax consequences from their interaction.

The proposal introduces rules to incorporate the OECD’s February 2024 “Amount B Report,” which seeks to simplify arm’s length pricing for specific distribution transactions, especially in low-capacity countries. It suggests allowing flexibility in the arm’s length principle for controlled transactions between Danish companies and qualified distributors in countries with a double taxation treaty with Denmark.

Additionally, the draft Act proposes easing transfer pricing documentation obligations for SMEs by reducing requirements for low-risk controlled transactions. It also seeks to address hybrid mismatches by adjusting the reclassification of transparent entities, ensuring they are treated as independent taxpayers in line with OECD guidelines.

Earlier, Denmark enacted Law No. 684, published on 11 June, 2024, introducing amendments to align the Minimum Taxation Act with the OECD’s model rules and guidelines for the Pillar Two global minimum tax.

The law includes protection rules to prevent groups from exploiting transitional provisions to avoid taxation and simplifies calculation rules for applying the permanent exemption provision in line with the OECD’s December 2023 guidelines.

In addition, the Danish Official Gazette published Law No. 107/2024, implementing defensive tax measures targeting non-cooperative tax jurisdictions on the EU list on 31 January 2024.

The law targets tax evasion and avoidance by disallowing deductions for payments to recipients in blacklisted countries (Belize, Seychelles, Antigua and Barbuda).