Denmark: Court Rulings on Transfer Pricing Penalties
Two Danish court rulings have recently been published concerning the penalties for failing to provide transfer pricing documentation when demanded by the tax authority. In the lower court ruling, the company was penalized for providing insufficient documentation. Even though the 60-day submission deadline had been met, the documentation covered different income years from those requested. In the second, higher court ruling, the company was penalized for failing to meet the 60-day deadline, even though the documentation existed and no transfer pricing adjustments were deemed necessary.
These cases highlight the importance of having contemporaneous and readily-available transfer pricing documentation, even if the business’ transfer pricing policies are adjudged as being consistent with the arm’s length standard. Similar rules exist in numerous countries, including Singapore and the UK.