- Updated
- May 2025
- Sections
- 14
- Questions
- 44
Key Facts
Core Framework
The arm’s length principle is governed by the Tax Assessment Act (Ligningsloven), section 2. Guidance on transfer pricing is provided in the Legal Guidance (DJV), section C.D.11. (Transfer Pricing)
Guidance on the role of the OECD TPG in the application of the arm’s principle is provided in DJV, section C.D.11.2.1.1 (Armslængde-princippet og Transfer Pricing Guidelines).
Section 2 of the Tax Assessment Act contains the Danish arm's length provision and in the explanatory memoranda (preparatory legislative work) there is a direct reference to the arm's length principle contained and described in the OECD Transfer Pricing Guidelines (hereafter TPG). The reference is dynamic in the sense that the most recent version of the TPG is applied in Denmark. This understanding has been verified by Danish courts. Transfer pricing rules, guidelines and practice/case law in Denmark are described in The Legal Guidance (DJV). DJV is based on and fully consistent with the guidance provided in the TPG.
Guidance on comparability analysis is provided in DJV, section C.D.11.5 (Sammenlignelighedsanalyse).
The explanatory memoranda to the Tax Assessment Act, section 2, refers to the arm’s length principle as contained and described in the TPG. The guidance and standard for performing a comparability analysis in Denmark is fully aligned with the guidance outlined in Chapter III of the TPG.
There is a preference for comparable data including data from transactions on comparable markets.
Secret comparables have not been used for transfer pricing assessment purposes.
Guidance on use of arm’s length range and/or statistical measures is provided in DJV, section C.D.11.5.9 (Tolkning og anvendelse af data til at fastlægge armslængdepriser og vilkår).
Use of range and statistical tools are applied in the pricing of controlled transactions, where the use of such measures is considered appropriate, cf. the TPG.
Documentation
The Tax Control Act (Skattekontrolloven), section 37-52, requires taxpayers to a) disclose certain information about transfer pricing in their tax returns and b) prepare and submit transfer pricing documentation (master and local file) and c) prepare and submit CbC reports. The specific transfer pricing documentation requirements in Denmark are described in administrative ordinance on the documentation of the pricing of controlled transactions (Bekendtgørelse nr 468 af 19/04/2022) and administrative ordinance on country by country reporting (Bekendtgørelse nr 1304 af 14/11/2018). Further guidance is provided in DJV, section C.D.11.13.
The Danish transfer pricing documentation requirements are fully aligned with OECD standards as described in TPG chapter V and Annex I-IV to chapter V.
The Tax Control Act (Skattekontrolloven), section 37-52, requires taxpayers to a) disclose certain information about transfer pricing in their tax returns and b) prepare and submit transfer pricing documentation (master and local file) and c) prepare and submit CbC reports. The specific transfer pricing documentation requirements in Denmark are described in administrative ordinance on the documentation of the pricing of controlled transactions (Bekendtgørelse nr 468 af 19/04/2022) and administrative ordinance on country by country reporting (Bekendtgørelse nr 1304 af 14/11/2018). Further guidance is provided in DJV, section C.D.11.13.
The Danish transfer pricing documentation requirements are fully aligned with OECD standards as described in TPG chapter V and Annex I-IV to chapter V.
The Tax Control Act (Skattekontrolloven), section 37-52, requires taxpayers to a) disclose certain information about transfer pricing in their tax returns and b) prepare and submit transfer pricing documentation (master and local file) and c) prepare and submit CbC reports. The specific transfer pricing documentation requirements in Denmark are described in administrative ordinance on the documentation of the pricing of controlled transactions (Bekendtgørelse nr 468 af 19/04/2022) and administrative ordinance on country by country reporting (Bekendtgørelse nr 1304 af 14/11/2018). Further guidance is provided in DJV, section C.D.11.13.
The Danish transfer pricing documentation requirements are fully aligned with OECD standards as described in TPG chapter V and Annex I-IV to chapter V.
Tax Control Act (Skattekontrolloven), section 84. Further guidance on penalties and sanctions is provided in DJV, section C.D.11.13.1.3.3. (Sanktioner ved manglende eller mangelfuld transfer pricing-dokumentation)
The penalties for failure to comply with the submission deadline and/or transfer pricing documentation requirements can amount to Danish Krone (DKK) 250 000 (~EUR 33 600) per company per year, plus an additional amount equal to 10% of any income adjustments issued related to non-compliance with the arm’s length principle for the fiscal year. Furthermore, the burden of proof shifts to the taxpayer in transfer pricing cases where the required transfer pricing documentation has not been submitted before the deadline.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
- Other
Selection: Most appropriate method
Dispute Resolution
Denmark’s MAP Profile
Taxpayers can apply for binding rulings, though they are rarely provided for transfer pricing. Select taxpayers have access to enhanced relationship programs. Bilateral or multilateral APAs and MAP can be requested under double tax treaties. Denmark also participates in ICAP.
Denmark’s MAP Profile
Taxpayers can apply for binding rulings, though they are rarely provided for transfer pricing. Select taxpayers have access to enhanced relationship programs. Bilateral or multilateral APAs and MAP can be requested under double tax treaties. Denmark also participates in ICAP.
Simplifications
As of January 2025, the legislative framework for implementing the political commitment is in the process of being drafted and adopted. Denmark currently only allows for the application of the simplified and streamlined approach for baseline marketing and distribution activities in respect of transactions with wholesale distributors resident in “covered jurisdictions”, provided that Denmark has a double tax treaty with the relevant jurisdiction.
Special Topics
Guidance on valuation techniques to be used in controlled transactions involving intangibles is provided in DJV, section C.J. (Værdiansættelse). Guidance on application of the arm’s length principle to transactions involving intangibles is also provided in DJV, section C.D.11.6. (Armslængdeprincippet i relation til immaterielle aktiver ).
Guidance is provided on the valuation of controlled transactions involving intangibles, which is considered to be fully consistent with the guidance in the TPG on the use of valuation techniques.
Guidance on the arm’s length principle in relation to hard to value intangibles is provided in DJV, section C.D.11.6.6 (Immaterielle aktiver, der er svære at værdiansætte).
Guidance on the arm’s length principle – including pricing of HTVI – is applicable in Denmark, cf. the Tax Assessment Act, section 2, which contains a direct reference to the TPG in the explanatory memoranda (preparatory legislative work).
Guidance on the arm’s length principle in relation to intra-group services is provided in DJV, section C.D.11.8 (Armslængdeprincippet i relation til serviceydelser).
The explanatory memoranda to the Tax Assessment Act, section 2 refers to the arm’s length principle as contained and described in the TPG. Guidance provided on pricing of intra-group services in Denmark is fully aligned with the guidance outlined in Chapter VII of the TPG.
Guidance on the arm’s length principle in relation to financial transactions is provided in DJV, section C.D.11.10 (Særligt om finansielle transaktioner)
Full OECD Questionnaire
Legal ReferenceThe arm’s length principle is governed by the Tax Assessment Act (Ligningsloven), section 2. Guidance on transfer pricing is provided in the Legal Guidance (DJV), section C.D.11. (Transfer Pricing)
Legal ReferenceGuidance on the role of the OECD TPG in the application of the arm’s principle is provided in DJV, section C.D.11.2.1.1 (Armslængde-princippet og Transfer Pricing Guidelines).
Section 2 of the Tax Assessment Act contains the Danish arm's length provision and in the explanatory memoranda (preparatory legislative work) there is a direct reference to the arm's length principle contained and described in the OECD Transfer Pricing Guidelines (hereafter TPG). The reference is dynamic in the sense that the most recent version of the TPG is applied in Denmark. This understanding has been verified by Danish courts. Transfer pricing rules, guidelines and practice/case law in Denmark are described in The Legal Guidance (DJV). DJV is based on and fully consistent with the guidance provided in the TPG.
Legal ReferenceA common definition of related parties is provided in both the Tax Assessment Act (Ligningsloven), section 2, and in the Tax Control Act (Skattekontrolloven), section 37. Guidance on the definition of related parties is provided in DJV, section C.D.11.1.2 (Hvem er omfattet af armslængdeprincippet).
According to the Tax Assessment Act, section 2, and the Tax Control Act, section 37, control/related parties are defined based on either formal control (>50% shareholding) or actual control (e.g. control based on shareholder agreement).
Legal ReferenceGuidance on transfer pricing methods is provided in DJV, section C.D.11.4 (Transfer pricing-metoder).
The approved OECD-methods are to be used in Denmark. However, taxpayers are allowed to use other methods under the guidance in TPG 2.9. but the burden of proof is then on the taxpayer to demonstrate that the other method is more appropriate than the approved OECD-methods for pricing the transaction in question. As also provided for in the TPG, Denmark uses various valuation techniques for determining the arm’s length price/value of businesses and (intangible) assets.
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (provided)
The explanatory memoranda to the Tax Assessment Act, section 2, refers to the arm’s length principle as contained and described in the latest version of the TPG. The criterion used in Denmark for the application of transfer pricing methods is fully aligned with the guidance outlined in Chapter II of the TPG.
- Hierarchy of methods (not selected)
- Most appropriate method (selected)
Legal ReferenceHydrocarbons Tax Act (Kulbrinteskatteloven)
Special tax rules govern activities related to the extraction of oil and gas – the Hydrocarbons Tax Act. Under these rules, controlled transactions involving oil and gas are priced using a CUP equivalent method.
Legal ReferenceGuidance on comparability analysis is provided in DJV, section C.D.11.5 (Sammenlignelighedsanalyse).
The explanatory memoranda to the Tax Assessment Act, section 2, refers to the arm’s length principle as contained and described in the TPG. The guidance and standard for performing a comparability analysis in Denmark is fully aligned with the guidance outlined in Chapter III of the TPG.
There is a preference for comparable data including data from transactions on comparable markets.
Secret comparables have not been used for transfer pricing assessment purposes.
Legal ReferenceGuidance on use of arm’s length range and/or statistical measures is provided in DJV, section C.D.11.5.9 (Tolkning og anvendelse af data til at fastlægge armslængdepriser og vilkår).
Use of range and statistical tools are applied in the pricing of controlled transactions, where the use of such measures is considered appropriate, cf. the TPG.
Legal ReferenceGuidance on comparability adjustments is provided in DJV, section C.D.11.5.8 (Sammenlignelighedsjusteringer).
Comparability adjustments are required under the circumstances described in the TPG.
Legal ReferenceGuidance on valuation techniques to be used in controlled transactions involving intangibles is provided in DJV, section C.J. (Værdiansættelse). Guidance on application of the arm’s length principle to transactions involving intangibles is also provided in DJV, section C.D.11.6. (Armslængdeprincippet i relation til immaterielle aktiver ).
Guidance is provided on the valuation of controlled transactions involving intangibles, which is considered to be fully consistent with the guidance in the TPG on the use of valuation techniques.
Legal ReferenceTax Depreciation Act (Afskrivningsloven), section 40. State Tax Act (Statsskatteloven), section 4.
Capital gains or losses from the disposal of goodwill, know-how, patents, copyrights, designs or models, trademarks and similar rights are included in the calculation of taxable income, cf. the Tax Depreciation Act (afskrivningsloven), section 40, paragraph 6 in conjunction with paragraphs 1 and 2, and/or the State Tax Act (Statsskatteloven), section 4. Tax Depreciation Act, section 40, paragraph 1, 2 and 6 states that acquirers may depreciate the purchase price of goodwill and other intangible assets by up to 1/7 annually. Gains or losses from sale are calculated as the difference between sales price and acquisition price less depreciations.
Legal ReferenceGuidance on the arm’s length principle in relation to hard to value intangibles is provided in DJV, section C.D.11.6.6 (Immaterielle aktiver, der er svære at værdiansætte).
Guidance on the arm’s length principle – including pricing of HTVI – is applicable in Denmark, cf. the Tax Assessment Act, section 2, which contains a direct reference to the TPG in the explanatory memoranda (preparatory legislative work).
The conditions for applying the HTVI approach in Denmark are those described in TPG 6.186 – 6.195. The HTVI guidelines target the abuse of information asymmetry by taxpayers. Abuse means that relevant information about the value of the intangibles has been withheld from the tax administration in order to reduce the overall tax burden of the MNE group. Therefore, the application of the HTVI rules can generally only have the effect of increasing the overall taxation of the MNE group.
Legal ReferenceSection 3 of the Danish Tax Assessment Act, which has been implemented according to COUNCIL DIRECTIVE (EU) 2016/1164 of 12 July 2016.
In Denmark, the transfer pricing analysis for transactions falling within scope of the HTVI approach is guided by TPG 6.186 – 6.195. The analysis of HTVI transactions does not differ from the analysis established in Chapters I and VI of the OECD Transfer Pricing Guidelines. Depending on the facts and circumstances, HTVI transfers may be subject to the provisions of the GAAR in Section 3 of the Danish Tax Assessment Act.
Legal ReferenceThe statute of limitations for transfer pricing adjustments expires in the 6th year after the end of the income year. See section 26(5) of the Tax Administration Act (skatteforvaltningsloven), cf. subsections (1) and (2). Further guidance is provided in DJV, section C.D.11.14 (Ansættelsesfrist for transfer pricing-sager)
The statute of limitations for HTVI transactions is the same as for controlled transactions in general (6 years). The period is extended to 10 years where information has been withheld from the tax authorities intentionally or through gross negligence.
Bilateral or multilateral APAs can be requested under the general terms and conditions in Danish double tax treaties.
The use of hindsight for purposes of pricing controlled transactions in Denmark is governed by the guidance provided in the TPG. Transfer pricing staff in the Danish tax administration are highly qualified professionals. Internal instructions, training and knowledge sharing are provided and supported on an ongoing basis. Inappropriate use of hindsight in audits would be detected before issuance of a transfer pricing assessment. TP audits are reviewed and discussed prior to completion.
There is no special statute of limitations for HTVI in Denmark.
Corresponding adjustments can only be allowed for closed years if the Danish competent authority agrees to the primary adjustment.
This would not be a typical scenario, but multiple adjustments are possible under the guidance in Chapters I and VI of the TPG.
Legal ReferenceGuidance on the arm’s length principle in relation to intra-group services is provided in DJV, section C.D.11.8 (Armslængdeprincippet i relation til serviceydelser).
The explanatory memoranda to the Tax Assessment Act, section 2 refers to the arm’s length principle as contained and described in the TPG. Guidance provided on pricing of intra-group services in Denmark is fully aligned with the guidance outlined in Chapter VII of the TPG.
Legal ReferenceGuidance on the arm’s length principle in relation to the simplified approach for low value-adding intra-group services is provided in DJV, section C.D.11.8.4 (Særligt om interne serviceydelser med lav værdi).
Legal ReferenceTax deductibility of costs is governed by the State Tax Act (Statsskatteloven), section 6.
Tax deductibility of service payments is determined under the conditions provided in the State Tax Act, section 6. Deductible expenses are defined as expenses used to acquire, secure and maintain taxable income. Costs related to stewardship/shareholder interests would typically not be tax deductible in Denmark.
Legal ReferenceGuidance on the arm’s length principle in relation to financial transactions is provided in DJV, section C.D.11.10 (Særligt om finansielle transaktioner)
Legal ReferenceAnti avoidance rules related to financial transactions can be found in the Corporate Income Tax Act (Selskabsskatteloven) and in the Tax Assessment Act (Ligningsloven): CITA, section 2, paragraph 1, litra d (withholding tax on intercompany interest payment), CITA, section 11 (thin cap), CITA, section 11 A (intercompany insurance premiums), CITA, section 11 B and 11 C (interest deduction limitations), TAA, section 3 (GAAR – artificial/abusive arrangements etc.) Guidance on the above rules is described in DJV, section C.D.2.4.4 and section C.I.
Denmark has: a) anti-avoidance rules limiting interest deductions under certain circumstances, b) anti-avoidance rules disallowing deductions for inter-company insurance premiums under certain circumstances; and c) GAAR provisions which may disregard artificial arrangements under certain circumstances. Withholding tax rules on intercompany interest payments may also be relevant to the tax treatment of financial transactions.
Legal ReferenceGuidance on the arm’s length principle in relation to CCAs is provided in DJV, section C.D.11.9 (Armslængdeprincippet i relation til CCA’er)
There are no special tax rules for CCAs in Denmark other than the guidance provided in the TPG. The tax consequences of a CCA are therefore considered on a transactional basis.
Legal ReferenceThe Tax Control Act (Skattekontrolloven), section 37-52, requires taxpayers to a) disclose certain information about transfer pricing in their tax returns and b) prepare and submit transfer pricing documentation (master and local file) and c) prepare and submit CbC reports. The specific transfer pricing documentation requirements in Denmark are described in administrative ordinance on the documentation of the pricing of controlled transactions (Bekendtgørelse nr 468 af 19/04/2022) and administrative ordinance on country by country reporting (Bekendtgørelse nr 1304 af 14/11/2018). Further guidance is provided in DJV, section C.D.11.13.
The Danish transfer pricing documentation requirements are fully aligned with OECD standards as described in TPG chapter V and Annex I-IV to chapter V.
- Master file consistent with Annex I to Chapter V of the TPG (selected)
- Local file consistent with Annex II to Chapter V of the TPG (selected)
- Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
- Specific transfer pricing returns (separate or annexed to the tax return) (selected)
Legal ReferenceFiling of master and local file is governed by the Tax Control Act, section 37-42, and an administrative ordinance (Bekendtgørelse nr 468 af 19/04/2022). Filing of country by country reports is governed by the Tax Control Act (Skattekontrolloven), section 47-52, and administrative ordinance (Bekendtgørelse nr 1304 af 14/11/2018).
Danish documentation requirements are aligned with the OECD three-tier approach and can be submitted in Danish, Norwegian, Swedish or English language. Submission of transfer pricing documentation is mandatory for fiscal years starting on or after 1 January 2021. The master and local file must be submitted within 60 days after the deadline for filing the corporate income tax return. The Country-by-Country report must be submitted no later than 12 months after the last day of the fiscal year reported for. In a sheet annexed to the tax return, companies must provide standardized information on the nature and extent of their commercial or economic transactions with related parties.
Legal ReferenceTax Control Act (Skattekontrolloven), section 84. Further guidance on penalties and sanctions is provided in DJV, section C.D.11.13.1.3.3. (Sanktioner ved manglende eller mangelfuld transfer pricing-dokumentation)
The penalties for failure to comply with the submission deadline and/or transfer pricing documentation requirements can amount to Danish Krone (DKK) 250 000 (~EUR 33 600) per company per year, plus an additional amount equal to 10% of any income adjustments issued related to non-compliance with the arm’s length principle for the fiscal year. Furthermore, the burden of proof shifts to the taxpayer in transfer pricing cases where the required transfer pricing documentation has not been submitted before the deadline.
Legal ReferenceTax Control Act (Skattekontrolloven), section 40. Further guidance on limited documentation requirements for small companies is provided in DJV, section C.D.11.13.1.4. (Begrænset dokumentationspligtig (mindre virksomheder) efter SKL § 40)
Small taxpayers (less than 250 employees and either revenue below DKK 250 million or balance sheet below DKK 125 million) are subject to more limited documentation requirements. Purely domestic transactions are exempt. One-off transactions of insignificant financial value are partially exempted. However, all controlled transactions must still be carried out in accordance with the arm's length principle.
Legal ReferenceDenmark’s MAP Profile
Taxpayers can apply for binding rulings, though they are rarely provided for transfer pricing. Select taxpayers have access to enhanced relationship programs. Bilateral or multilateral APAs and MAP can be requested under double tax treaties. Denmark also participates in ICAP.
- Rulings (selected)
- Enhanced engagement or cooperative compliance programmes (selected)
- Advance Pricing Agreements (APA) (selected)
- International Compliance Assurance Programme (ICAP) (selected)
- Mutual Agreement Procedures (selected)
As of January 2025, the legislative framework for implementing the political commitment is in the process of being drafted and adopted. Denmark currently only allows for the application of the simplified and streamlined approach for baseline marketing and distribution activities in respect of transactions with wholesale distributors resident in “covered jurisdictions”, provided that Denmark has a double tax treaty with the relevant jurisdiction.
See response to question 34 above.
Legal ReferenceThe Danish Tax Administration Act (Skatteforvaltningsloven), section 27(1)(4). Further guidance on statutes of limitations is provided in DJV, section C.D.11.14 (Ansættelsesfrist for transfer pricing-sager)
A downward transfer pricing adjustment in Denmark is premised on a corresponding upward adjustment in another jurisdiction, cf. the Tax Assessment Act (Ligningsloven), section 2, paragraph 6. Downward corresponding adjustments can be allowed without a mutual agreement procedure if sufficient documentation for the foreign upward transfer pricing adjustment has been provided and the Danish Tax Agency approves of the foreign tax authority's decision.
Year-end adjustments are allowed in Denmark to the extent that such adjustments are considered in accordance with the guidance provided in Chapter III of the TPG.
Legal ReferenceGuidance on secondary adjustments is provided in DJV, section C.D.11.16 (Sekundære justeringer og betalingskorrektion)
Secondary adjustments are made to the extent that such adjustments have tax consequences - withholding tax, taxable dividends, etc.
The wording of article 7 in most of Denmark’s actual double tax treaties (about 80) corresponds to the pre-2010 version of Article 7 in the OECD Model Tax Convention. Only two of the double tax treaties are based on the post-2010 version of Article 7.
- Article 7 as it read before 2010. (selected)
- Article 7 as it reads after 2010. (selected)
Where the wording of Article 7 in a tax treaty corresponds to the pre-2010 version of Article 7 in OECD’s Model Tax Convention, the AOA from 2008 will be applied, cf. the comments to article 7 of the OECD MTC 2008, and the 2008 Report on the attribution of profits to permanent establishments.
Legal ReferenceGuidance on attribution of profits to permanent establishments is provided in DJV, section C.D.11.11 (Armslængdeprincippet i relation til faste driftssteder)
Where the wording of Article 7 of the relevant tax treaty corresponds to the wording of Article 7 in OECD’s 2008 MTC, the AOA from 2008 will be applied. Where the wording of Article 7 of the relevant tax treaty corresponds to the wording of Article 7 in OECD’s 2010 MTC, the AOA from 2010 will be applied.
- Yes, they follow the AOA as described in the 2008 Report on the Attribution of Profits to Permanent Establishments (selected)
- Yes, they follow the AOA as described in the 2010 Report on the Attribution of Profits to Permanent Establishments (selected)
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