On October 8, coinciding with the beginning of the parliamentary year in Denmark, a draft bill was presented for debate that modifies the terms of presentation of transfer pricing documentation and the consequences of failure to present it.

To date, as in most EU countries, the Danish transfer pricing rules require taxpayers to prepare transfer pricing documentation and make it available to the Tax Administration upon request. Since January 1, 2019, such documentation must be contemporary, i.e., it must be prepared and available at the time of filing the corporate income tax return. In the event of failure to comply with the obligation to prepare transfer pricing documentation contemporaneously, the Tax Administration may ignore it in the transfer pricing assessment.

However, the Danish Supreme Court’s 2019 ruling on the Microsoft Case (SKM2019.136.HR) limited the Tax Administration’s ability to ignore transfer pricing documentation prepared by the taxpayer in a non-contemporary manner, i.e., after the filing of the return.

The draft bill of October 4 tries to respond to this Supreme Court ruling, by introducing the obligation to submit the transfer pricing documentation together with the corporate income tax return, so that it is no longer possible to prepare it later. The draft bill also clarifies the effects of non-compliance, allowing the Danish Tax Administration to make transfer pricing adjustments.

If this draft bill is finally passed, Denmark would become the first EU country to require transfer pricing documentation to be filed together with the return, as is the case in some Latin American countries.