Bachmann/Partner has in a specific case become aware that the Director of Public Prosecutions has announced in a letter dated 15 December 2022 that the Danish Tax Agency may in future close cases regarding timely submission of TP documentation with administrative fines. The change concerns “only” the so-called basic fine and means that the cases will no longer be handed over to the police and the prosecutor’s office as test cases if the taxpayer agrees with the offence.
Since the deadline for submitting transfer pricing documentation was set at 60 days after the deadline for submitting the information form (formerly the tax return), a number of Danish companies have been imposed a (basic) fine for late submission. The fine, which is set at DKK 250,000 per income year, can be reduced to DKK 125,000 if the missing documentation is subsequently prepared. The fine is maintained even if the documentation proves to be sufficient and there is no basis for correction of the internal prices and terms.
By recommendation of 4 November 2022, the Danish Tax Agency requests the Director of Public Prosecutions to indicate whether the Danish Tax Agency may administratively decide on violations of the rules on timely submission of transfer pricing documentation by issuing a notice of fine. Under the current system, the Danish Tax Agency had to forward transfer pricing documentation cases as test cases to the police and prosecution authorities, which meant that the case could not be finalised without a court case.
According to the recommendation, the level of the fine can still be derived at DKK 250,000 with the possibility of reduction to DKK 125,000 per income year. The level of the fine has been determined on the basis of a number of decisions handed down in accordance with the level of the fine stated in the legislative history.
The Danish Tax Agency’s recommendation does not include cases where the fine is increased by 10% of the increase in income if there is an increase in income due to non-compliance with the arm’s length principle. In these cases, the police and prosecution authorities will continue to be authorised to close the case until there have been sufficient test cases.
Although the Danish Tax Agency will in future be able to decide fine cases concerning the (basic) fine itself, the accused will still be entitled to defence counsel. Bachmann/Partners Law Firm has extensive experience with transfer pricing criminal cases and has acted as defence counsel for several large multinational groups, and we have extensive experience in cooperating with the company’s auditor in this regard. We are ready to provide advice if you or your company has been contacted by the Danish Tax Agency in connection with compliance with the transfer pricing rules.
For further information, please contact Christian Bachmann on tel. +45 30 30 45 21 / chb@bachmann-partners.dk Ann Rask Vang on tel. +45 20 94 78 21 / ava@bachmann-partners.dk.