C.D.11.15.2.1 Reopening of the tax assessment

This section concerns how a taxpayer may resolve a double taxation by requesting the tax authority to reopen the tax assessment either in accordance with national rules or under a MAP.

The enterprise may request the Danish Tax Agency to reduce the taxable income in Denmark because of a foreign transfer pricing increase of an associated enterprise, subject to the condition that the transfer pricing income adjustment is related to transactions with the Danish enterprise. See sections 26 and 27 of the Tax Administration Act.

If a reopening is requested, the Danish Tax Agency will assess whether the foreign increase etc. is documented, see section 2(6) of the Danish Tax Assessment Act (Ligningsloven) and undertake an arm’s length assessment of the increase and the transactions between the Danish and foreign parties.

In situations where the Danish Tax Agency agrees to the foreign tax authority’s increase, i.e., both the chosen transfer pricing method and the arm’s length assessment, access to reopening and a corresponding reduction in Denmark will be granted under the national rules.

The opposite will apply when the increase has occurred in Denmark and the income of the associated taxpayer abroad should be reduced. In such case, the associated taxpayer may investigate whether the foreign competent authority is able to grant a corresponding reduction in accordance with the rules of the country concerned. Alternatively, the taxpayer can contact the competent authority in Denmark for MAP, which will then contact the foreign competent authority.

A request for reopening the tax assessment in accordance with the national rules is not a condition for applying for double taxation to be resolved under MAP. In conjunction with the MAP request, the Danish tax authorities shall as a first step assess whether they agree with the increase and therefore are able to grant a corresponding adjustment in accordance with the national rules. However, the opposite does not apply so that a request for reopening the tax assessment under the national rules does not automatically constitute a request for MAP. In most cases, it will therefore be advantageous for the taxpayer to resolve the double taxation by requesting for a MAP, rather than requesting a reopening in accordance with the national rules.

The section includes:

When the authorities agree.
When the authorities disagree.

Note

A condition for a reduction of the tax assessment in Denmark is that the income is already taxed at the other party or that an equivalent increase has been made at the other party. See section 2(6) of the Tax Assessment Act.

When the authorities agree

The Danish Tax Agency may only reopen the tax assessment and make a corresponding reduction of the taxable income of the Danish enterprise if the Danish Tax Agency and the taxpayer agree with the foreign tax authority’s increase of the foreign enterprise’s income. This means that the Danish Tax Agency must agree to that the prices and conditions applied by the foreign tax authority are in accordance with the arm’s length principle.

If the Danish Tax Agency reduces the income of the associated Danish entity by the same amount as the increase for the foreign entity, the transfer pricing double taxation will be resolved, and the case will thereby be closed. In this case, the double taxation will thus be resolved without any need for the authorities to initiate MAP.

When the authorities disagree

If, on the other hand, the Danish Tax Agency does not agree that the foreign adjustment is at arm’s length, the Danish Tax Agency are not able to make a corresponding reduction of the income of the Danish entity.

If the taxpayer has solely requested reopening in accordance with the Danish statutory rules, reopening will be refused, and guidance will be given on the possibility of resolving the double taxation by MAP.

The taxpayer may then request the Danish Tax Agency’s competent authority to initiate a MAP to resolve the transfer pricing double taxation, whereby the tax authorities involved will seek to reach agreement of the dispute though negotiations.

If the taxpayer from the start has requested that double taxation is resolved by MAP, the competent authority in Denmark will then contact the foreign competent authority.

Contents

See also

Note

When the authorities agree

When the authorities disagree

See also