This section describes how an enterprise can avoid double taxation by requesting the tax authorities to reopen the tax assessment.
This section contains the following:

  • Reopening the tax assessment;
  • When the tax authority agrees;
  • When the tax authority disagrees.

Reopening the tax assessment

The enterprise may ask the Danish Tax Agency to reopen the tax assessment of the enterprise when a foreign tax authority has made a transfer pricing adjustment with respect to the taxable income of an associated enterprise, provided of course that the transfer pricing income adjustment relates to transactions with the Danish enterprise. See Sections 26 and 27 of the Danish Tax Administration Act (Skatteforvaltningsloven).

The opposite is the case when an adjustment has been made in Denmark and the corresponding adjustment is to be made abroad. The group may submit a request to the foreign competent authority for a corresponding adjustment in accordance with the rules of that state.

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Please note

It is a prerequisite for making a downwards adjustment of the tax assessment that a corresponding increase in respect of the other party has been made. See Section 2(6) of the Danish Tax Assessment Act (Skatteforvaltningsloven).

When the tax authority agrees

The Danish Tax Agency may only reassess and make a corresponding adjustment of the Danish enterprise’s taxable income if the agency agrees with the increase made by the foreign tax authority in respect of the foreign enterprise. This means that the agency must agree that arm’s length prices and conditions were applied when the foreign tax authority carried out the tax assessment.

If the Danish Tax Agency reduces the taxable income of the associated Danish party by the amount with which the foreign associated party’s taxable income has been increased, the double taxation is eliminated, and the case is thus finalised. In that situation, the double taxation situation has been resolved without any need for the authorities to negotiate the elimination of double taxation under the Double Taxation Convention.

When the tax authority disagrees

If the Danish Tax Agency considers that the foreign adjustment is not in accordance with the arm’s length principle, a corresponding downwards adjustment of the taxable income of the party resident in Denmark cannot be made.
A similar situation arises where the Danish Tax Agency has made a primary adjustment in respect of an enterprise established in Denmark, and the foreign tax authority subsequently considers that it is not possible to make a corresponding downward adjustment of the foreign associated party’s taxable income.

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