The Danish tax authority publishes transfer pricing report for 2017

In the annual transfer pricing report for 2017, the Danish tax authority accounts for Danish transfer pricing corrections in 2017. The report also gives a status on the number of pending Danish Mutual Agreement Procedures (MAP) and Advance Pricing Agreements (APA).

Increases total DKK 6.1 billion in 2017

In a newly published report, the Danish tax authority announced that Danish transfer pricing adjustments resulted in a total increase of Danish taxable income by DKK 6.1 billion in 2017. The increase reflects 153 transfer pricing audits resulting in an increased taxable income.

2017 follows the trend of recent years where transfer pricing adjustments have resulted in increases of around DKK 6-7 billion each year. The extraordinary increases in 2012 (DKK 21.217 billion), 2013 (DKK 17.374 billion) and 2014 (DKK 20.320 billon) were due to a few cases involving high value intangible assets.


Transfer pricing adjustments resulting in an increase, 2013-2017:

 

Year 2013  2014  2015  2016  2017
Cases 187  190  142  188  153
Amount, million DKK 17,374  20,320  5,921  7,322 

6,103

 

When looking at the individual transfer pricing adjustments, the average adjustment in 2015, 2016 and 2017 resulted in increases of around DKK 110 million (approximately EUR 15 million), while the largest adjustments resulted in increases of around DKK 500 million (approximately EUR 67 million). In addition, there were several "small" adjustments resulting in increases of around DKK 4-5 million (approximately EUR 600,000) on average.

 

Reductions totalling DKK 3.3 billion in 2017

At the same time, taxable income was reduced by a total of DKK 3.3 billion in 39 cases in 2017. While the total increase of taxable income is stable at around DKK 6-7 billion annually over recent years, reductions vary from year to year.

 

Transfer pricing adjustments resulting in a decrease, 2011-2017:

 

Year 2011 2012 2013 2014 2015 2016 2017
Cases 24 18 13 16 26 20 39
Amount, million DKK 781 351 311 5,352 449 11,460 3,331

 

Breakdown of total increase by project type

The report also breaks down the total increase into project types.

 

Number of transfer pricing increases according to project type, 2015-2017:

 

Year 2015 2016 2017
Project type Number of audits Percent of total amount Number of audits Percent of total amount Number of audits Percent of total amount
Continuous transactions
88 62  139 74 125 82
Intangible assets 23 16 11 
Others 31 22  41  22  17  11 
In total 142 100  188  100  153  100 
                                                                             

The project type "intangible assets" accounted for 34 percent of the total increase in 2016. In 2017, that was down to 10 percent of the total increase.

 

Size of transfer pricing increases according to project type, 2015-2017:

 

Year 2015 2016 2017
Project type Amount in billion DKK Percent of total amount Amount in billion DKK
Percent of total amount Amount in billion DKK
Percent of total amount
Continuous transactions
4.4 74 3.9 53 4.8 78
Intangible assets 1.1 18 2.5 34 0.6 10
Others 0.4 7 1.0 13 0.7 12
In total 5.9 100 7.3 100 6.1 100 

 

Mutual Agreement Procedures (MAP) and Advance Pricing Agreements (APA)

The Danish tax authority has allocated more resources to solving MAP cases and a record number of cases were resolved through mutual agreements in 2017.

 

Number of pending and completes transfer pricing MAP cases at end of year:

Year 2012 2013 2014 2015 2016 2017
Pending cases 76 89 105 129 149 148
Completed cases 13 17 23 25 27 51

 

There was also an increase in the number of Advance Pricing Agreements (APA).

 

Number of pending and closed Advance Pricing Agreement cases at end of year:

 

Year 2012 2013 2014 2015 2016 2017
Pending cases 13 11 19 19 21 27
Completed cases 2 5 3 8 7 6

 

Alternative Dispute Resolution (ADR)

A couple of years ago, the Danish tax authority introduced an alternative dispute resolution mechanism (ADR) to resolve transfer pricing disputes. The Danish tax authority has now trained 10 internal mediators in a British inspired model. Four transfer pricing disputes have been resolved by the new mechanism so far.

Kromann Reumert's legal advice

Kromann Reumert’s tax team acts in numerous transfer pricing matters, including several of the largest Danish contentious tax matters ever. Clients include Danish and foreign multinationals, and our services include:

 

  • negotiations with the Danish tax authority
  • Mutual Agreement Procedures (MAP)
  • EU Arbitration Convention procedures
  • Advance Pricing Agreements (APA)
  • administrative appeals
  • tax litigation.