Transfer Pricing

For several years, transfer pricing has been the largest and most profitable key action area for the Danish Customs and Tax Administration (SKAT). Moreover, transfer pricing is the tax assessment area posing the biggest problems in terms of legal protection to businesses.

One reason for the very sharp increases, is the fact that SKAT, often based on very shallow foundations, disregards TP documentation. The result of this is that SKAT makes estimated tax assessment, and that the appeal and court system is not yet sufficiently geared up for handling TP cases. Moreover, MAP (mutual agreement procedure) does not guarantee that double taxation will not take place, and the Arbitration Convention only applies within the EU.

This being the case, a great need exists for TP cases to receive strategic advisory services and process experience as early as during the tax assessment process. 

Our competences – strategic advisory services and litigation

Plesner lends assistance in TP cases involving total increases in excess of DKK 25 billion.

Normally, we become involved during the tax assessment process, including in negotiations with SKAT, and most often in collaboration with the business's daily tax consultant.

Plesner does not draw up TP documentation or make valuations. We do what we do best – that is provide strategic advisory services and conduct TP cases. In that connection, we also have extensive experience in closing TP cases through settlement.

In 2014 as well as in 2015, Plesner received the "Transfer Pricing Firm of the Year" prize for Denmark, which is awarded by the International Tax Review.

In 2002, Plesner won a case before the Danish National Tax Tribunal, which is regarded as the first actual transfer pricing case, and which involved a pharmaceutical company’s assignment of rights to a (yet to be completed) pharmaceutical product to its foreign parent company.

Since then, no material decisions have been rendered by the Danish National Tax Tribunal on transfer pricing, and no landmark decisions based on the current rules on TP documentation have been made by the Danish National Tax Tribunal or the courts.

Therefore, authoritative clarification is called for in a series of key transfer pricing issues, and this fuels the pronounced uncertainty regarding legal protection in the area.

Pending cases

The vast majority of cases in which Plesner provides assistance are either pending before SKAT or the Danish National Tax Tribunal. The cases involve significant problems such as the following:

  • Valuation of intellectual property rights
  • Whether assignment of intellectual property rights has taken place at all
  • Determination of internal settlement prices for goods and services
  • Determination of the rate of interest on intercompany loans
  • Significance of the fact that a company has been running tax losses for a number of years
  • Choice of valuation method
  • Significance in terms of TP of moving the headquarters of a group abroad
  • Significance in terms of TP of closing the production of a subsidiary due to rationalisation
  • Whether section 4 of the Danish State Tax Act authorises determination of remuneration – not including cases where the rule on the arm’s length principle of section 2 of the Danish Tax Assessment Act applies
  • Whether TP documentation can be disregarded
  • Significance of TP documentation being disregarded
  • Questions about burden of proof
  • Scope of the Danish National Tax Tribunal's and the courts' right of review of SKAT's estimated decisions
  • The choice between appealing or instituting MAP negotiations/arbitration proceedings
  • Whether the conditions for instituting the agreement procedure/arbitration proceedings under the Arbitration Convention have been met
  • Determination of the right appeals body under the Arbitration Convention
  • Commencement of APA (advanced pricing agreement) negotiations with or without rollback
  • Whether the conditions for payment adjustment and reversal have been met
  • Limitation
  • Use of valuation experts before the Danish National Tax Tribunal

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