Deadline for submitting transfer pricing documentation: New rules to consider

All related entities are obliged to apply the arm's length principle. In addition, some entities are also subject to the transfer pricing ("TP") documentation obligations and must submit their written documentation electronically to the Danish Tax Agency within 60 days of the deadline for submission of the tax return. 

Who are obliged to file 

Taxable entities that carry out controlled transactions must comply with the TP regulations. Controlled transactions are transactions between taxable entities, which are, for example, group-related, or where one of the parties exercises decisive influence over the other party in the transaction. 

Most are aware that companies may need to file TP documentation but often it comes as a surprise for foreign entities having a permanent establishment in Denmark, that even transactions between the head office and the permanent establishment are included in the requirement to file TP documentation. 

Fewer taxable entities will be subject to TP documentation 

In 2025, the Danish Parliament enacted changes to the TP documentation rules. The Ministry of Taxation estimates that the changes mean that a minimum of 1,500 entities will be exempt from having to prepare and submit TP documentation. These will predominantly be small and medium-sized entities. The new rules are relevant for all filings with deadlines in 2026 onwards.

Adjusted thresholds for the limited documentation obligation
Entities with fewer than 250 employees and either 1) a total balance sheet below DKK 195 million or 2) an annual consolidated turnover below DKK 391 million will going forward only be subject to limited TP documentation requirements. The thresholds were previously DKK 125 million and DKK 250 million. The amendment does not affect the first criterion regarding the number of employees, which remains at 250 employees. This means that the changes will have no impact on entities or groups with more than 250 employees on a consolidated basis.

The TP documentation in this case is limited to documentation of transactions with physical or legal persons and permanent establishments located outside the EU/EEA in a country with which Denmark has not entered a double taxation treaty.

New de minimis threshold
In addition, a de minimis threshold has been introduced, such that taxable entities with total controlled transactions below DKK 5 million will be exempt for preparing written TP documentation. This rule will have a significant impact for many companies with very small intra-group transactions including permanent establishments.

This exception applies where the taxable entity's total controlled transactions, excluding receivables and debt, amount to less than DKK 5 million in the income year and the taxable entity's total controlled receivables and debt at the end of the income year amount to less than DKK 50 million on a gross level calculated as controlled transactions, receivables and debt that are subject to the TP documentation obligation. 

The exception does not apply to controlled transactions relating to intangible assets, nor to controlled transactions where the counterparty is resident or located in a foreign state outside the EU and EEA that does not exchange information with the Danish tax authorities under an agreement on assistance in tax matters.

Other exemptions
The existing exemption for controlled transactions which are insignificant in terms of scale and frequency is retained. 

There is also no obligation to prepare TP documentation for controlled transactions in the form of dividends, contributions and similar payments made in cash.

Another exception has been introduced for subsidiaries where the taxable entity together with other group-related parties owns less than 5% of the capital and less than 5% of the voting rights. The rule concerns cases where the taxable entity participates in an agreement on joint decisive influence over the underlying subsidiary and caters for situations where the taxable entity has invested in a company via a transparent entity, for example a private equity fund. The exemption from the documentation obligation presupposes that the relevant transaction is not carried out as part of the agreement on joint decisive influence.

The written TP documentation must consist of:

1. A master file: a joint documentation describing the group including a group diagram showing the legal and organisational structure, a description of the group's business activities, information about the group's intangible assets, information about the group's financing as well as financial- and tax position etc.
    
2. A local file: country-specific documentation covering the specific entity including a detailed description of the entity and the controlled transactions and an analysis hereof and information about the entity's financing as well as financial- and tax position etc. 
    

Both files must include appendixes, and description of intercompany agreements. Benchmark documentation can be requested by the Danish Tax Agency. 

The documentation must be of such nature that it can form the basis for an assessment of whether prices and terms for controlled transactions are set in accordance with what could have been achieved if the transactions were concluded between independent parties.

All documentation can be submitted in either Danish, Norwegian, Swedish or English.

For taxable entities that form part of a larger multinational group where the consolidated turnover amounts to DKK 5.6 billion or more, the TP documentation also consists of the submission of a country-by-country report. This contains standardized and schematic information about the group. 

The taxable entity must both file a notification that it is subject to the country-by-country reporting obligation and potentially submit the country-by-country report. 

The notification includes specifying the group company that submits the country-by-country report and the tax authority to which the report is submitted. The filing of the country-by-country report itself is relevant when:

• The taxable entity is the ultimate parent company of the group, or 
   
• The ultimate parent company is foreign and is not obliged to submit a country-by-country report in its jurisdiction of residence, or 
   
• There is no automatic exchange of country-by-country reports with Denmark in the country where the group's country-by-country report is submitted.
   

The deadline for the filing is 12 months after the last day in the relevant income year. 

Regardless of whether the taxable entity is subject to the rules on the preparation and submission of TP documentation, the taxable entity must provide the Danish Tax Agency with information on the nature and extent of commercial or economic transactions in the tax return (Da. Oplysningsskemaet) where those transactions are controlled transactions. 

Taxable entities that fail to submit the TP documentation on time or that submit documentation without the necessary quality are punished with a fine of DKK 250,000 per taxable entity (including the permanent establishment) per income year. The amount can be reduced to a fine of DKK 125,000 per taxable entity if the missing or improved documentation is subsequently submitted with the required quality. Furthermore, the fine is increased with an amount equal to 10% of any additional taxable income in case there is an increase as a result of the arm's length principle not being met. 

The Danish Tax Agency may, upon request, postpone the deadline if special circumstances warrant it. However, it should be noted that the documentation must be prepared on an ongoing basis. As a new rule applicable for the income year 2025 onwards the deadline for submission of the TP documentation will automatically be extended proportionally if the deadline for the submission of the tax return has been extended. The deadline is then 60 days after the new deadline for filing the tax return. 

In some circumstances extension for filing the master file may be accepted if there are justified delays in gathering the relevant information from other countries. In such case the local file must be filed on time together with the letter from the Danish Tax Agency accepting the postponement with filing of the master file. 

Furthermore, it should be noted that if the master file for the current income year is not ready by the filing deadline due to a later deadline in the relevant foreign country, the previous year's master file can be submitted provisionally, if it was prepared within 12 months preceding the filing deadline.  The submission must include the expected date for the current year's documentation to be filed and any significant changes affecting the Danish entity which are not included in the local file must be briefly described. An approved extension of the deadline for submission is not required in this case. However, if the joint documentation is older than one year, an extension must be requested.

If you have questions relating to the filing requirements, please feel free to contact us.