The Danish tax authority publishes transfer pricing report for 2017

Increases total DKK 6.1 billion in 2017

In a newly published report, the Danish tax authority announced that Danish transfer pricing adjustments resulted in a total increase of Danish taxable income by DKK 6.1 billion in 2017. The increase reflects 153 transfer pricing audits resulting in an increased taxable income.

2017 follows the trend of recent years where transfer pricing adjustments have resulted in increases of around DKK 6-7 billion each year. The extraordinary increases in 2012 (DKK 21.217 billion), 2013 (DKK 17.374 billion) and 2014 (DKK 20.320 billon) were due to a few cases involving high value intangible assets.

Transfer pricing adjustments resulting in an increase, 2013-2017:

Year	2013	2014	2015	2016	2017
Cases	187	190	142	188	153
Amount, million DKK	17,374	20,320	5,921	7,322	6,103

When looking at the individual transfer pricing adjustments, the average adjustment in 2015, 2016 and 2017 resulted in increases of around DKK 110 million (approximately EUR 15 million), while the largest adjustments resulted in increases of around DKK 500 million (approximately EUR 67 million). In addition, there were several "small" adjustments resulting in increases of around DKK 4-5 million (approximately EUR 600,000) on average.

Reductions totalling DKK 3.3 billion in 2017

At the same time, taxable income was reduced by a total of DKK 3.3 billion in 39 cases in 2017. While the total increase of taxable income is stable at around DKK 6-7 billion annually over recent years, reductions vary from year to year.

Transfer pricing adjustments resulting in a decrease, 2011-2017:

Year	2011	2012	2013	2014	2015	2016	2017
Cases	24	18	13	16	26	20	39
Amount, million DKK	781	351	311	5,352	449	11,460	3,331

Breakdown of total increase by project type

The report also breaks down the total increase into project types.

Number of transfer pricing increases according to project type, 2015-2017:

Year	2015		2016		2017
Project type	Number og audits	Percent of total amount	Number of audits	Percent of amount	Number og audits	Percent of amount
Continuous transactions	88	62	139	74	125	82
Intangible assets	23	16	8	4	11	7
Others	31	22	41	22	17	11
In total	142	100	188	100	153	100

 The project type "intangible assets" accounted for 34 percent of the total increase in 2016. In 2017, that was down to 10 percent of the total increase

Size of transfer pricing increases according to project type, 2015-2017:

Year	2015		2016		2017
Project type	Amount in billion DKK	Percent of total amount	Amount in billion DKK	Percent of total amount	Amount in billion DK	Percent of total amount
Continuous transactions	4.4	74	3.9	53	4.8	78
Intangible assets	1.1	18	2.5	34	0.6	10
Others	0.4	7	1.0	13	0.7	12
In total	5.9	100	7.3	100	6.1	100

Mutual Agreement Procedures (MAP) and Advance Pricing Agreements (APA)

The Danish tax authority has allocated more resources to solving MAP cases and a record number of cases were resolved through mutual agreements in 2017.

Number of pending and completes transfer pricing MAP cases at end of year:

Year	2012	2013	2014	2015	2016	2017
Pending cases	76	89	105	129	149	148
Completed cases	13	17	23	25	27	51

There was also an increase in the number of Advance Pricing Agreements (APA).

Number of pending and closed Advance Pricing Agreement cases at end of year:

Year	2012	2013	2014	2015	2016	2017
Pending cases	13	11	19	19	21	27
Completed cases	2	5	3	8	7	6

Alternative Dispute Resolution (ADR)

A couple of years ago, the Danish tax authority introduced an alternative dispute resolution mechanism (ADR) to resolve transfer pricing disputes. The Danish tax authority has now trained 10 internal mediators in a British inspired model. Four transfer pricing disputes have been resolved by the new mechanism so far.

Kromann Reumert's legal advice

Kromann Reumert’s tax team acts in numerous transfer pricing matters, including several of the largest Danish contentious tax matters ever. Clients include Danish and foreign multinationals, and our services include:

• negotiations with the Danish tax authority
• Mutual Agreement Procedures (MAP)
• EU Arbitration Convention procedures

• Advance Pricing Agreements (APA)
• administrative appeals
• tax litigation.