The Danish Transfer Pricing Documentation Requirements

Transcription

1 The Danish Transfer Pricing Documentation Requirements Dansk-Tysk Handelskammer 8th of May 2014 Philip Noes, legal advisor SKAT (The Danish Tax Administration)

2 History In Denmark a dedicated transfer pricing regime was first introduced in 1998 In short the regime consisted of The application of the arms length principle Specific transfer pricing documention requirements A mandatory form called no / In principle the same rules apply today but with some amendments Side 2

3 Arms s Length Principle The arms length principle is defined in art. 9 of the OECD Model Tax Convention/in the OECD Transfer Pricing Guidelines and the Danish legislation and practice comply with this definition Side 3

4 Who has to comply with the ALP Taxpayers over which natural or legal persons exercise a controlling influence i.e.> 50% of the share capital or > 50% voting rights which exercise a controlling influence over legal persons which are affiliated with a legal person i.e. legal persons where the same group of shareholders have a dominant position or where there is a mutual management which have a permanent establishment abroad which are a foreign natural or legal person with a permanent establishment in Denmark, or which are a foreign natural or legal person with hydrocarbon-related activities Side 4

5 The Threshold The TPD requirements include both controlled transactions between DK/DK group companies and between DK/a foreign country group company However in both situations a threshold has to be passed: If the group as a whole (i.e. not only the Danish entity of the group) has less than 250 employees and» either a total balance of less than DKK 125 mio. (app. 17 mio. ) or a turnover less than DKK 250 mio. (app. 34 mio.) Then a transfer pricing documentation must be prepared only for controlled transactions with group entities (including a PE) situated (1) in countries without a double taxation convention with DK and (2) this/these country/countries must not be an EU member state Side 5

6 The TPD requirements The taxpayer must prepare and keep written documentation for the prices and terms set for the controlled transactions Side 6

7 What is SKAT looking for Basically the transfer pricing documentation must provide SKAT with the information nescessary to assess whether or not the arms length principle has been applied (correct) Side 7

8 The TPD requirements, cont. The TPD has to be prepared for each year (ready when filing your tax return) but you only have to forward it on SKATs specific request and then you will have a 60 days deadline When a TPD for a given year has been prepared you only have to make the nescessary amendments for the following years to keep it up to date Side 8

9 The TPD requirements, cont. The requirements are specified in BEK (executive order) no th January 2006 and in SKATs Legal Guide: Information on the group and its commercial activities Legal structure, organizational structure, a historic overview, the line of business, turnover and EBIT for the last three years for the company in question and the controlled entities it has dealt with Information on the controlled transactions Types of transactions, their volume, cost contribution arrangements etc. A comparability analysis Characteristics of property or services, a functional analysis, the contractual terms, the economic circumstances and the business strategies A list of any written intercompany agreements Language requirements: Danish, Swedish, Norwegian or English Side 9

10 The scope The scope of the documentation depends on the scope and complexity of the enterprise and the controlled transactions Side 10

11 Comparability analysis - the use om databases SKAT can only require a database examination as part of a tax audit Side 11

12 Different TPD concepts DK has its own TPD requirement You are welcome instead to forward a TPD based on the EU TPD concept (master file and a country specific file) Side 12

13 Penalty regime Penalties if a company does not comply with the TPD requirements (not form ) Skattekontrollovens 17 (The Tax Control Act) A fixed penalty (DKK (app )) and 10% of a (possible) following income adjustment Side 13

14 Information available Where can I read about it? Basically there is a language issue SKATs website: Virksomhed > transfer pricing > Transfer pricing in English SKATs Juridiske Vejledning ( Legal Guide ) which endeavor to describe (in short) the legal practice on most taxation issues not only on transfer pricing Side 14