Contents
This section concerns what is meant by transfer pricing double taxation.
The section includes:
- Transfer pricing double taxation
How transfer pricing double taxation arises - When taxable income is subject to adjustment
Transfer pricing double taxation
There are two types of double taxation:
- Legal: When two or more countries tax a person on the same income.
- Economic: When the same income is taxed at two different taxpayers.
Transfer pricing double taxation is the economic double taxation that occurs when different persons or companies are subject to tax on the same income. It also refers to the same income being taxed at both the head office and a permanent establishment.
How transfer pricing double taxation arises
Transfer pricing double taxation occurs when a country’s tax authority takes the view that an associated party has not acted in accordance with the arm’s length principle, and the tax authority therefore makes an upward adjustment of the taxable income of the enterprise (a primary adjustment).
If the same income is already taxed at an associated taxpayer in another country, there will be an actual double taxation of the same income concerning two different taxpayers - or between a taxpayer and their permanent establishment.
When adjustments are made to the taxable income
Where a foreign tax authority has made a primary adjustment (increase) concerning a controlled transaction, the taxpayer may request the competent authority of the Danish Tax Agency (Skattestyrelsen) in Denmark for a corresponding adjustment to be made in Denmark, either according to the ordinary tax assessment deadlines or the extraordinary deadline set in section 27(1) para (4) of the Danish Tax Administration Act (Skatteforvaltningsloven) (reopening). The adjustment may also be initiated by the Danish tax authorities, in which case the foreign tax authority must consider making a corresponding adjustment abroad in accordance with its own national rules.
Alternatively, the taxpayer may submit a request to the Danish or foreign tax authorities for initiation of a Mutual Agreement Procedure (MAP) between the competent authorities of the two countries, to resolve of the double taxation. This request may refer to the relevant double taxation treaty, to the EU Arbitration Convention or to the EU Arbitration Directive. Under the EU Arbitration Directive, the request must be submitted to the competent authorities of both countries.
In the sections below, ‘MAP’ refers to the Mutual Agreement Procedure.
A request for a corresponding adjustment/ elimination of the double taxation may be sent in printed or electronic form to store-selskaber-sikker-post@sktst.dk
The address is:
The Danish Tax Agency (Skattestyrelsen)
Large Companies - Competent Authority (Store Selskaber - Kompetent Myndighed)
Hannemanns Allé 25
DK-2300 Copenhagen S
See also
See also section
- C.D.11.14 concerning the assessment deadline for transfer pricing cases.
- C.F.8.1.1 concerning double taxation treaties.
- C.F.8.2.2.7 concerning income allocation for permanent establishments.
- C.F.8.2.2.9 concerning associated enterprises.
- C.F.8.2.2.25 concerning the Mutual Agreement Procedure (MAP).
- Report on action 14 in the OECD Action Plan ‘Base Erosion and Profit Shifting’ (BEPS), which sets out a number of measures to strengthen the effectiveness of the MAP process.
- C.F.8.3 about the Multilateral Convention (MLI)
- C.F.8.4 about the EU Arbitration Directive
Note
A transfer pricing adjustment can be made between two associated enterprises resident in Denmark, between Danish and foreign associated parties, and between an enterprise and its permanent establishment.