On 7 December 2017 the Danish Parliament passed a new law (No. L 13) launching a deadline for preparing and submitting the transfer pricing documentation.
The most important changes are:
- The new law requires to prepare the transfer pricing documentation in line with the OECD’s (Organization for Economic Co-operation and Development’s) concept of a local file, a master file, and Country-by-Country report under Action 13 of the Base Erosion and Profit Shifting (BEPS) Action Plan.
- The documentation must be submitted to the tax authorities within 60 days of a request. However, the law does not specify any deadline for the preparation of the documentation.
- In pending cases, the tax authorities are taking the position that the documentation must be prepared by the deadline for the corporate income tax return, which generally is six months after the end of the financial year.
- Transfer pricing documentation must be prepared by the deadline for the tax return. The documentation need not be filed together with the tax return. Noncompliance with the deadline may mean that: (1) the burden of proof shifts from the tax authorities to the taxpayer; (2) taxable income may be determined on an estimated basis; and (3) transfer pricing penalties are imposed. These consequences may arise even if a taxpayer submits proper documentation within the 60-day deadline, provided the documentation was not prepared in due time.
- The deadline is quite tight and may cause practical issues with respect to compliance for multinational enterprises.
Consequently, the new law will apply from 1 January 2019. This means that the law generally applies to the transfer pricing documentation that must be prepared for the 2018 income year. Conversely, for companies with an income year 2018, which is on 30 June 2018, the new law will apply to the income year 2019.
