Danish documentation requirements

On 28 April 2016 Denmark published a new transfer pricing documentation order that specifies the transfer pricing documentation requirements under Section 3 B of the Tax Control Act.

The publication of the amended documentation requirements follows the enactment on 18 December 2015 of an amendment to the Tax Control Act introduction country-by-country reporting for years starting on or after 1 January 2016.

BEPS documentation standard

The new transfer pricing documentation requirements implement the October 2015 OECD BEPS standard for transfer pricing documentation by requiring the documentation to consist of:

• a master file covering the entire group; and
• a country-specific documentation for each entity liable to tax in Denmark.

The contents of the master file and the country-specific entity documentation are similar to the content required by the OECD in its October 2015 Action 13 Transfer Pricing Documentation and Country-by-Country Reporting. In addition to requiring more information to be included in transfer pricing documentation, this now also means that there is increased emphasis on intangibles and financing arrangements, compared to the earlier documentation requirements.

As was the case in the past, documentation may be prepared in Danish, English, Norwegian or Swedish.

The new requirements are effective for controlled transactions taking place during income years starting on or after 1 January 2016. A grandfathering rule applies in that transfer pricing documentation for income years starting on or before 31 December 2016 may be prepared in according with the previous transfer pricing documentation requirements, subject to preparing the country-by-country report.

Software-based compliance

Because the new documentation requirements are based on the October 2015 OECD BEPS standard, which is gradually gaining acceptance as the new global standard for transfer pricing documentation, compliance with the new Danish transfer pricing documentation standards lends itself to be partly automated in order to avoid duplication of work within a multinational.

In 2015 Otico Software launched TP Controller (www.otico-software.com), which is designed to save users significant time by streamlining the control and management of transfer pricing data and by automating repetitive tasks related to content production. TP Controller also automates the preparation of a country-by-country report, including the related data validation report. The software is part of a new generation of tax technology in the form of stand-alone applications with focus on user-friendly interfaces, significant time savings, and limited implementation.