Contents
This section explains what is meant by transfer pricing double taxation.
The section contains the following:
- Economic double taxation;
- How double taxation arises;
- Where adjustments are made to the taxable income.
Economic double taxation
Transfer pricing double taxation means the economic double taxation that arises when different persons or companies are subject to tax on the same income. It also refers to the same income being taxed both in a head office and a permanent establishment.
How double taxation arises
Where a tax authority takes the view that an enterprise that is part of a group of associated enterprises has not applied arm's length prices and conditions in its calculation of taxable income, and the result is that the calculated taxable income is too low, the tax authority will make an upward adjustment of the taxable income of the enterprise (a primary adjustment). In this situation, double taxation will occur.
Since this is an intra-group transaction, an upward adjustment of the taxable income of an associated party in one state generally means that there should be a downward adjustment of the taxable income of the associated party in the other state (a corresponding adjustment).
Where adjustments are made to the taxable income
Where a foreign tax authority has made a primary adjustment (increase) to a controlled transaction, the taxpayer can contact the Danish Tax Agency and request a corresponding downward adjustment in Denmark. Similarly, the adjustment can be initiated in Denmark, and it is then the foreign competent authority that is responsible for making a corresponding adjustment in the other state.
A request for a reopening of the tax assessment may be sent on paper to:
Danish Tax Agency, Large Companies – Competent Authority, Hannemanns Allé 25, 2300 Copenhagen S, Denmark
or by e-mail to store-selskaber-sikker-post@sktst.dk
(References – not translated)
Please 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.