TP documentation and Amount B

The new rules regarding Amount B apply to income years starting on or after 1 January 2025  and the proposed changes to transfer pricing documentation apply for the income year 2025 and subsequent years  and allow the limited application of the OECD’s Amount B in situations involving jurisdictions with which Denmark have a bilateral tax treaty that are listed as covered jurisdictions, and have implemented Amount B. 

Amendments to Danish transfer pricing documentation requirements
The bill introduces changes to the thresholds that determine when a taxpayer is subject to Denmark’s full transfer pricing documentation requirements. The changes relate both to the size of the group and the volume of the individual taxpayer’s controlled transactions. Certain types of controlled transactions have become explicitly exempted from the documentation obligation. While the bill introduces relief from some obligations for some taxpayer, the rules do include technical details and we therefore recommend that your reach out before concluding that the exemptions apply to your specific case.

Thresholds for full transfer pricing documentation requirements
The bill introduces higher thresholds for revenue and balance sheet totals. A taxpayer is subject only to limited documentation requirements if, together with affiliated global group entities, the taxpayer has fewer than 250 employees and either (i) annual revenue of less than DKK 391 million (previously DKK 250 million) or (ii) a balance sheet total of less than DKK 195 million (previously DKK 125 million).

It remains a requirement to prepare transfer pricing documentation for transactions with controlled parties resident in jurisdictions outside the European Union (EU) and the European Economic Area (EEA) with which Denmark does not have a tax treaty.

Volume of controlled transactions
The bill also introduces an exemption from the transfer pricing documentation requirements based on the volume of the taxpayer’s controlled transactions. Taxpayers with total controlled transactions below DKK 5 million in the income year and intercompany balances below DKK 50 million  at year-end are now generally not required to prepare transfer pricing documentation. However, documentation would still be required for (i) controlled transactions involving intangible assets covered by section 40 of the Danish Depreciation Act and (ii) transactions with jurisdictions outside the EU/EEA that do not exchange information with the Danish tax authorities. Controlled transactions that are explicitly exempt from the Danish documentation obligation are excluded from the DKK 5 million/DKK 50 million thresholds. 

In addition to the exemptions based on transaction volume, the bill also introduces exemptions for certain equity-related transactions, such as cash dividend distributions and cash capital increases , as well as for minor investments presumed to be passive capital placements.

Implementation of Amount B
The bill introduces limited adoption of the OECD’s Amount B simplified approach to the application of the arm’s length principle to in-country baseline marketing and distribution activities for certain transaction types and specific jurisdictions. 

The bill does not implement Amount B in general; however, Denmark acknowledges the political agreement and permit the application of Amount B in situations involving jurisdictions with which Denmark has a bilateral tax treaty that are listed as covered jurisdictions, and have implemented Amount B. In such cases, standardized benchmarks for certain distribution activities can be applied – which represents a deviation from the arm’s length principle.

The Amount B approach will initially apply only to 23 specific jurisdictions  – including Brazil, Mexico, and Thailand, which are key markets or trading partners for Denmark. Furthermore, application of Amount B is subject to the condition that these jurisdictions also implement the approach.

Amount B is subject to several conditions, for example, it applies only to wholesale distribution of tangible goods and does not apply to commodities.