Executive Summary
General Requirements
- Controlled entities must utilize the arm’s length principle for all commercial and financial transactions under Section 2 of the Tax Assessment Act.
- The framework applies to cross-border transactions and specific domestic dealings involving asymmetric tax regimes or entities with entity-specific losses.
- Control is defined as direct or indirect ownership of more than 50% of share capital or voting rights, or the exercise of decisive influence over decisions.
- Denmark follows a dynamic interpretation of the arm’s length principle, incorporating the most recent version of the OECD Transfer Pricing Guidelines.
Documentation Requirements
- Qualifying taxpayers must prepare and submit both a Master File and a Local File annually to the Danish Tax Administration within the prescribed electronic system.
- Standardized information regarding the nature and volume of controlled transactions must be disclosed as an appendix to the annual tax return.
- Benchmark studies are a mandatory component of transfer pricing documentation to substantiate the comparability analysis for material transactions.
- Documentation may be prepared in Danish, English, Swedish, or Norwegian.
Results of Non-Compliance
- Failure to submit documentation by the deadline results in a base penalty of DKK 250,000 per company per year.
- The Danish Tax Agency may impose an additional penalty equal to 10% of any income adjustment resulting from a transfer pricing audit.
- The burden of proof shifts to the taxpayer if the mandatory documentation is deemed inadequate or not submitted timely.
- Late submission of documentation is generally categorized as gross negligence under Danish case law.
Country Specific Information
- New legislative updates effective for the 2025 income year raise the exemption thresholds to DKK 195 million in assets or DKK 391 million in turnover.
- For the 2025 income year and onward, a de minimis rule exempts entities with less than DKK 5 million in total reportable controlled transactions.
- Interest deductibility is restricted by thin capitalization rules (4:1 debt-to-equity ratio) and supplementary EBITDA-based limitations.
- The Hydrocarbon Tax Act mandates specific CUP-equivalent pricing for controlled transactions involving the extraction of oil and gas.
Compliance Table
| Document | Deadline | Language | Thresholds, Scope & Penalties |
| Local File | Within 60 days of the corporate income tax return deadline. | Danish, English, Swedish, or Norwegian. | Mandatory if group >250 employees and either group assets >DKK 195m or group revenue >DKK 391m (2025 rules). Scope: Cross-border and specific domestic transactions. Penalty: DKK 250,000 per year. |
| Master File | Within 60 days of the corporate income tax return deadline. | Danish, English, Swedish, or Norwegian. | Mandatory for entities meeting Local File thresholds. Covers group-level functional and financial data. Penalty: DKK 250,000 per year plus 10% of tax adjustments. |
| CbC Notification | No later than the last day of the reporting fiscal year of the MNE group. | English or local languages. | Mandatory for all constituent entities of groups with consolidated revenue $\ge$ EUR 750 million. Only the administration company in a joint taxation group needs to file. |
| CbC Report | Within 12 months from the last day of the reporting fiscal year. | English. | Mandatory for UPEs or surrogate entities with consolidated group revenue >EUR 750.4 million. Penalty is case-specific and determined by individual assessment. |
| Other / SMEs | Standardized disclosure form due with the corporate income tax return. | Danish. | Mandatory disclosure of nature/extent of transactions for all tax-liable entities. Small businesses are exempt from full files if under size thresholds but still subject to arm’s length scrutiny. |
Disclaimer: This information is obtained from secondary sources and is included for informative purposes. It should be confirmed by a local advisor.
