When affiliated companies trade with each other, prices and terms of trade must be at a so-called arm’s length term. This means that prices and terms must be set in the same way as independent parties would set them with each other. If trade takes place across national borders, a pricing of an intra-group transaction that is not on arm’s length terms may mean that one of the countries receives a smaller share of the group’s taxable income, which means less tax revenue for the country.
It appears from SKAT’s control plan that the existing control efforts will be continued in 2017. The control cases are selected based on, among other things, the size of the transactions and the risk of errors, but all companies in the target group can be selected for control. SKAT thus focuses on ensuring that the companies’ taxable income reflects that the intra-group transactions take place on arm’s length terms. Companies that have intra-group transactions with each other must prepare and keep written documentation on how prices and terms for the intra-group trade are determined. The written documentation must be of such a nature that it can form the basis for SKAT’s assessment of whether prices and terms are set at arm’s length. If no documentation has been prepared, SKAT may determine arm’s length prices and terms on a discretionary basis. If SKAT is of the opinion that transactions have not been made on arm’s length terms, the prices and terms set may be changed to arm’s length prices and terms, regardless of the documentation provided. In most other Western countries, the tax authorities carry out controls of intra-group transactions in a similar way as in Denmark. A change in Denmark should in principle lead to a corresponding change (with the opposite sign) in the other country, otherwise double taxation will arise.
Bachmann/Partners provides assistance in connection with transfer pricing cases before SKAT and the National Tax Court. In addition, assistance is provided in connection with mutual agreement procedures, where companies request the cancellation of double taxation as a result of transfer pricing regulations in either Denmark or in another country. Bachmann/Partners also provides assistance in connection with so- called Advance Pricing Arrangements/Agreements (APA), which is an agreement between the competent authorities of two or more countries on the principles and conditions for the pricing of trade between group companies.
Christian Bachmann is the managing partner at Bachmann/Partners Law Firm. He has comprehensive experience regarding all topics concerning tax, VAT, duties and energy excises and li..
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Jan Pedersen was a professor of tax law at the Department of Law at the University of Aarhus from 1994 to 2021. Before becoming a professor he was an associate professor in criminal law. He has in-dep…
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