The first part of the new and stricter transfer pricing documentation requirements has been adopted
As a part of Bill No 46, which was finally adopted by the Danish Parliament on 18 December 2015, the Danish Parliament has now adopted the first part of the stricter transfer pricing documentation requirements recommended in the OECD BEPS Action Plan 13.
The new Act entails that groups having their headquarters in Denmark and having a total global turnover of at least DKK 5.6bn will be obliged to submit so-called country-by-country reporting to the Danish Customs and Tax Administration (SKAT) as a part of the transfer pricing documentation.
If the ultimate parent company's tax domicile is not Denmark, the country-by-country reporting is only to be prepared and submitted in Denmark if minimum one group company's tax domicile is Denmark and the group's ultimate parent company is resident in a country where there is no duty to prepare country-by-country reporting or automatic exchange of the country-by-country reporting does not take place with the Danish Customs and Tax Administration (SKAT).
By automatic exchange between the countries in which the group has activities, the object of the country-by-country reporting is to make sure that the tax authorities are better able to assess whether there is any basis for starting an examination of the group's transfer pricing issues.
The new country-by-country reporting must, as the name implies, contain information about each country in which the group operates. The exact requirements as to the contents of the country-by-country reporting will be determined by the Danish Minister for Taxation probably in the first half of 2016, but it is expected that the contents requirements will correspond to the OECD's proposal in BEPS Action Plan 13 and will include information about turnover, pre-tax profit, tax payments, capital structure, employees, tangible assets etc. The country-by-country reporting is also (expected) to identify each tax-relevant entity in the group, specify the entities' tax location and specify the entities' primary activities.
The country-by-country reporting must be submitted no later than 12 months after the last day in the income year covered by the reporting. If a group fails to prepare the country-by-country reporting, it could be fined.
The country-by-country reporting requirement for groups will apply to income years com-mencing on 1 January 2016 or later if the ultimate parent company is resident in Denmark. As for groups whose ultimate parent company is not resident in Denmark, the rules will only come into effect in respect of income years commencing on 1 January 2017 or later.
Concurrently with the Danish Parliament's consideration of the new rules about country-by-country reporting the Danish Customs and Tax Administration (SKAT) has worked on drafting a new statutory order on the general transfer pricing documentation requirements that are to apply to all undertakings subject to the requirement to prepare transfer pricing documentation.
The draft statutory order went out for consultation on 7 December 2015 with a response deadline of 5 January 2016. The new draft is essentially a reproduction of the documentation requirements laid down in the OECD BEPS Action Plan 13.
Compared to the current rules, it will be a changed structure with a so-called master file with information about the entire group and then country-specific documentation for the local en-tities. It means that the structure resembles the existing EU transfer pricing documentation standard.
To a wide extent the actual contents requirements correspond to the current Danish re-quirements, but the proposed new rules require additional information about intangible assets, financing and any tax agreements etc.
It is proposed that also the new general documentation requirements are to apply to income years commencing on 1 January 2016 or later.
Plesner assists clients in a large number of cases in connection with tax audits and complaints about transfer pricing issues. It is our experience that in a large number of these cases the quality of the client's documentation affects the possibilities of a positive decision. It is our assessment that this trend will only be enhanced with the new OECD standardised documentation requirements.