Denmark – Transfer Pricing (2025)

Legal framework and scope

The arm’s length principle in Denmark is governed by the Tax Assessment Act (Ligningsloven), section 2, which contains the domestic arm’s length provision. Administrative guidance, practice and case law are described in the Legal Guidance (DJV), notably section C.D.11 on Transfer Pricing. The preparatory legislative materials to the Tax Assessment Act explicitly refer to and adopt the arm’s length principle as set out in the OECD Transfer Pricing Guidelines (TPG), and Denmark applies the most recent version of the TPG dynamically; courts have affirmed this approach.

Arm’s length principle and the role of the OECD Guidelines

DJV, section C.D.11.2.1.1 (Armslængde-princippet og Transfer Pricing Guidelines) explains the role of the OECD TPG in applying the arm’s length principle. The Tax Assessment Act’s explanatory memoranda refer to the TPG; consequently, the TPG serve as the interpretative and operational standard for transfer pricing matters in Denmark.

Definition of related parties

A common definition of related parties for transfer pricing purposes is provided in both the Tax Assessment Act (Ligningsloven), section 2, and the Tax Control Act (Skattekontrolloven), section 37. Guidance on who is covered by the arm’s length principle is available in DJV, section C.D.11.1.2 (Hvem er omfattet af armslængdeprincippet). Control is assessed either by formal control (shareholding above 50%) or by actual control, for instance via shareholder agreements conferring effective control.

Methods and selection criteria

Denmark adopts the OECD-approved transfer pricing methods: the Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM) and Profit Split. Guidance on methods is in DJV, section C.D.11.4 (Transfer pricing-metoder). The selection criterion used in Denmark follows the TPG Chapter II: the most appropriate method should be applied rather than a statutory hierarchy of methods. Taxpayers may use other methods in line with TPG 2.9, but the burden of proof rests on the taxpayer to show that an alternative method is more appropriate for the transaction. Denmark also uses valuation techniques for determining arm’s length price/value of businesses and assets, consistent with the TPG.

Comparability and ranges

Denmark follows the comparability analysis described in Chapter III of the TPG; guidance is contained in DJV, section C.D.11.5 (Sammenlignelighedsanalyse). There is no automatic preference for domestic comparables; comparable data may include foreign transactions or data from comparable markets, with assessment of geographic comparability based on the specific transaction facts, market characteristics and data availability. Denmark does not permit secret comparables for transfer pricing assessments. The use of arm’s length ranges and statistical measures (for example interquartile range or other percentiles) is allowed and guided by DJV, section C.D.11.5.9, applied where appropriate. Comparability adjustments are required where indicated by the TPG, with guidance in DJV, section C.D.11.5.8.

Documentation and reporting

Denmark implements the OECD three-tier documentation approach. The Tax Control Act (Skattekontrolloven), sections 37–52, requires taxpayers to disclose standardized information on related-party transactions in a sheet attached to the tax return and to prepare and submit Master file, Local file and Country-by-Country (CbC) reports. The procedural rules are set out in the administrative ordinance on documentation of pricing of controlled transactions (Bekendtgørelse nr 468 af 19/04/2022 om dokumentation af prisfastsættelsen af kontrollerede transaktioner) and the administrative ordinance on country-by-country reporting (Bekendtgørelse nr 1304 af 14/11/2018 om land for land-rapportering). Further guidance is provided in DJV, section C.D.11.13.

Timing and languages: documentation obligations are mandatory for fiscal years commencing on or after 1 January 2021. The Master and Local files 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. Documentation may be submitted in Danish, Norwegian, Swedish or English. In addition, taxpayers must include standardized information on the nature and extent of related-party transactions in an annex to their tax return.

Penalties and compliance incentives: penalties are established under the Tax Control Act, section 84, and elaborated in DJV, section C.D.11.13.1.3.3. Failure to comply with submission deadlines and/or documentation requirements can trigger penalties of up to 250,000 DKK per company per year, plus an additional amount equal to 10% of any income adjustments related to non-compliance with the arm’s length principle for the fiscal year. Furthermore, failure to submit required documentation within the deadline shifts the burden of proof to the taxpayer in transfer pricing disputes.

Exemptions and materiality thresholds: under Tax Control Act, section 40, and DJV, section C.D.11.13.1.4, small taxpayers at group level—those employing fewer than 250 persons and having either turnover below DKK 250 million or a balance sheet total below DKK 125 million—are subject to limited documentation requirements. Such small taxpayers are required to prepare documentation only for controlled transactions with related parties resident in jurisdictions with which Denmark has no double tax treaty and which are not members of the EU or EEA. Purely domestic transactions between related parties both resident in Denmark and taxed under the same regime are exempt from documentation obligations. One-off transactions of insignificant financial value are partially exempt: only the type of transaction needs to be identified. Nevertheless, all controlled transactions must comply with the arm’s length principle and may be requested during an audit.

APAs, MAP and dispute prevention/resolution

Denmark provides rulings, enhanced engagement/cooperative compliance programmes for selected taxpayers, Advance Pricing Agreements (APAs) — unilateral, bilateral and multilateral — and Mutual Agreement Procedures (MAP). Denmark also participates in the International Compliance Assurance Programme (ICAP). Rulings can be requested on tax issues including transfer pricing, though binding rulings in transfer pricing are rarely issued in practice. Information on MAP and APA access is provided in Denmark’s OECD dispute resolution profile.

Simplified and streamlined approach for baseline marketing and distribution activities

As of January 2025, Denmark does not generally apply the simplified and streamlined approach of the Annex to Chapter IV of the TPG. The legislative framework to implement the political commitment is being drafted and adopted. Currently, Denmark allows application of the simplified approach only for transactions with wholesale distributors resident in “covered jurisdictions” under the Inclusive Framework statement, provided Denmark has a double tax treaty with the relevant jurisdiction. Denmark respects the outcome of the simplified and streamlined approach by a covered jurisdiction in line with the Inclusive Framework political commitment where applicable.

Safe harbours and other simplification measures

Denmark does not provide general safe harbours or industry-specific simplification measures beyond the limited documentation regime for small taxpayers.

Other legislative and administrative procedures

Denmark allows downward corresponding adjustments in the absence of a mutual agreement procedure when sufficient documentation demonstrates that a foreign authority has made a primary upward adjustment and the Danish tax authority approves the foreign decision. Tax Administration Act (Skatteforvaltningsloven), section 27(1)(4), enables extraordinary reassessment: a taxpayer can obtain a corresponding adjustment outside the normal time limit if the request is a direct result of the foreign tax authority’s decision, provided the Danish Tax Agency approves the foreign decision, the request is made within six months of the foreign decision, and the derived claim has not lapsed under the 10‑year time limit in section 34a(4).

Year-end adjustments are allowed when consistent with the guidance in Chapter III of the TPG. Secondary adjustments are recognized; guidance on secondary adjustments and payment corrections appears in DJV, section C.D.11.16. Secondary adjustments are effected when they have tax consequences such as withholding tax or deemed dividends.

Attribution of profits to permanent establishments

About 80 of Denmark’s double tax treaties contain Article 7 as it read before 2010, while only two treaties adopt the post-2010 wording. Where a treaty corresponds to the pre-2010 Article 7, Denmark applies the Authorized OECD Approach (AOA) from the 2008 Report on the Attribution of Profits to Permanent Establishments. Where a treaty corresponds to the post-2010 Article 7, Denmark applies the AOA as described in the 2010 Report. Guidance on PE profit attribution is provided in DJV, section C.D.11.11.

Conclusion

Denmark’s transfer pricing framework is firmly OECD-aligned: the arm’s length principle and the application of the most appropriate method guide the domestic approach; comparability analysis follows Chapter III; documentation requirements implement the three-tier OECD approach with clear deadlines, permitted languages and monetary and procedural penalties for non-compliance. Denmark provides administrative mechanisms for dispute prevention and resolution (rulings, APAs, MAP, ICAP) and allows unilateral corresponding adjustments under documented conditions. By instruction, this profile omits specific sections on commodities and intangible valuation; for detailed guidance on those topics, refer to the OECD Transfer Pricing Guidelines.

References

For more information and the OECD country profiles page, see: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html