Reporting requirements has been significantly increased as from year 2019
The previous threshold of DKK 5 million DKK has been abolished, i.e. all the controlled transactions has to be reported as part of a Danish company’s tax return.
From 2019 incl. (tax income year) all Danish companies must ensure complete reporting of all controlled transactions. Failure to do so will result in significant fines.
Furthermore, we foresee as from year 2020 that full Transfer Pricing documentation must be files together with the annual tax return. This is a game changer for the tax Authorities. We will provide further info on this later on when the Bill has passed Parliament.
For long time Denmark has required information on controlled transactions as part of the Danish tax return for companies. Since 1998 there has been a threshold of DKK 5 million before we had to file details of controlled transactions.
Consequently, most small and medium-sized companies were exempted from filling the detailed information of the controlled transactions as the volume of transactions was less than DKK 5 million. Thus, no major analysis would have to be conducted to calculate and specify the information for use in the tax return for these small and medium-sized companies.
The said threshold has been abolished as from the income year 2019. Consequently, all detailed information regarding the controlled transactions must be reported to the Tax Agency as part of a correct filed tax return for the year.
Any company that has had transactions with, for example, the other group affiliated companies or the principal shareholder must provide detailed information as an integrated part of the filing of the digital tax return, i.e. outline the nature and extent of the controlled transactions.
With this widening of the disclosure obligations a great number of smaller companies and major shareholder-owned companies will be obliged to file this Transfer Pricing information for the first time.
We strongly recommend that this task not is underestimated as it can be time consuming and complex.
We also recommend that you prepare separate documentation of the scope of the different types of controlled transactions before the (on-line) information form can be filled out.
Please note that you still must answer questions as to whether the company is covered by section 38 of the Tax Control Act (box 59).
Also, you must disclose whether there have been any trade or financial transactions with group affiliates during the income year (box 67). If yes to this question, further information on the nature and extent of the controlled transactions must be provided as part of the tax return.
The additional information to be provided in this case deals with, inter alia, the main area of activity of the taxpayer, the nature of the transactions and the total controlled transactions of the taxpayer. In addition, for each type of transaction, an amount interval must be specified, e.g. between DKK 0 – DKK 1 million. DKK 1 million – DKK 5 million etc.
Furthermore, for each controlled transaction the company must state in which state (s) the counterparty entities with which the transactions in question were controlled, are resident. The identification of the state (s) is based on a letter system where A = only in Denmark, B = only in the EU / EEA, etc.
It is important to ensure that the information provided is accurate as failure to comply with it may even result in significant fines.
For the small and medium sized-companies that previously were "exempted" by the threshold of DKK 5 million, the change in requirements entails extra work when completing the information form 2019 onwards in relation to the tax return for previous income years.
The information form for year 2019 and onwards will undoubtedly take longer to fill, both in terms of filing in the detailed information and outlining the volume of transactions.
The work on completing the tax return / information forms is therefore far more time-consuming than before, and we strongly recommend you begin planning for this new task.
If you have any questions on the above, please do not hesitate to contact your day-to-day accountant our internal tax department for further information of the above rules for your particular business.