Denmark has relaxed some of its transfer pricing documentation requirements, potentially removing a costly annual compliance exercise for at least 1,500 businesses.
The changes apply from the 2025 income year and are particularly relevant to smaller and medium-sized companies with limited cross-border transactions involving related businesses.
Under the revised rules, companies can generally escape the normal transfer pricing documentation requirement where their total cross-border controlled transactions are below DKK 5 million and their total controlled receivables and debt at year-end are below DKK 50 million.
There are important exceptions, including certain transactions involving intangible assets and transactions connected with particular jurisdictions outside the EU and EEA.
Denmark’s Parliament estimated during the legislative process that at least 1,500 businesses would be released from the obligation to prepare and submit transfer pricing documentation.
The wider legislative changes were estimated to generate around DKK 67 million in annual administrative savings for businesses.
For international companies with relatively modest Danish operations, the change could therefore mean fewer documents, lower compliance costs and less administrative work.
But it does not mean transfer pricing itself has disappeared.
Why Transfer Pricing Matters
Transfer pricing concerns transactions between related parties.
Imagine a German parent company owns a Danish subsidiary.
The Danish company might purchase products from the parent, pay for management services, borrow money from another group company or license intellectual property owned elsewhere in the group.
Because the businesses are related, they can influence the terms of those transactions in ways independent companies cannot.
Tax authorities therefore apply the arm’s-length principle.
In simple terms, prices and conditions between related businesses should correspond to those that independent parties would have agreed under comparable circumstances.
This matters because transfer prices can influence where a multinational group reports its profits and ultimately where corporate tax is paid.
Documentation Has Been a Significant Compliance Exercise
Transfer pricing documentation exists to demonstrate how controlled transactions were priced and why those prices comply with the arm’s-length principle.
For companies covered by Denmark’s full documentation requirements, the exercise is substantial.
The Danish Tax Agency states that transfer pricing documentation consists of two main elements:
- A master file covering the wider corporate group
- A local file for each Danish taxpayer within the group
The master file provides information about the group’s overall structure and activities.
The local file contains detailed information about the Danish entity, its controlled transactions and relevant financial and economic data.
For businesses with relatively small cross-border related-party transactions, preparing this material can create costs disproportionate to the size of the transactions involved.
That concern helped drive Denmark’s decision to relax the rules.
Who Benefits From the New DKK 5 Million Threshold?
From the 2025 income year, the Danish Tax Agency says companies are no longer covered by the ordinary transfer pricing documentation requirement when both of two conditions are satisfied.
First, total cross-border controlled transactions must be below:
DKK 5 million.
Second, total controlled receivables and liabilities at the end of the income year must be below:
DKK 50 million.
Both conditions matter.
A business with DKK 3 million in relevant transactions but DKK 60 million in controlled debt would therefore not qualify for the exemption simply because its transaction volume is below DKK 5 million.
Likewise, businesses should look at the total relevant controlled transactions rather than examining each individual transaction separately.
Smaller International Businesses Could See the Biggest Benefit
The change has an obvious international-business dimension.
Consider a foreign group with a relatively small Danish subsidiary.
The Danish operation might have limited management-service payments to its parent company and occasional purchases from another group business.
Previously, the company could still face substantial documentation work despite the relatively modest value of its international related-party activity.
If its relevant transactions and controlled balances now fall below the new thresholds, that annual documentation burden may disappear.
During Parliament’s consideration of the legislation, Denmark’s tax minister estimated that at least 1,500 businesses would be released from the transfer pricing documentation requirement.
The government expected the majority to be small and medium-sized companies.
That makes the reform less about changing taxation for Denmark’s largest multinational groups and more about reducing compliance costs where the tax risk is considered relatively limited.
Transfer Pricing Remains Important for Lead Roedl’s International Business Focus
The changes are particularly relevant to international businesses following Danish tax developments through Lead Roedl, whose tax practice includes transfer pricing, cross-border transactions, corporate taxation and the taxation of permanent establishments in Denmark.
Foreign companies entering Denmark can encounter transfer pricing questions in several ways.
A Danish subsidiary may transact with its overseas parent.
A Danish company may provide services to foreign group companies.
A foreign business with a permanent establishment in Denmark may need to determine what profits should be attributed to its Danish activities.
Groups can also have cross-border loans, licensing arrangements and management-service agreements.
The new documentation thresholds can make administration easier for some businesses, but companies still need to identify which transactions are controlled and understand how they have been priced.
The Arm’s-Length Principle Has Not Been Removed
This is probably the most important point for companies benefiting from the reform.
Being exempt from preparing formal transfer pricing documentation does not mean related companies can set whatever prices they want.
The Danish Tax Agency continues to state that transactions between businesses within the same group must take place according to the arm’s-length principle.
The new rules change the documentation obligation for qualifying companies.
They do not abolish the underlying transfer pricing requirement.
A business could therefore fall below the documentation thresholds and still need to ensure that the price charged for a service, loan, product or other transaction is commercially supportable.
This distinction matters if the Danish Tax Agency later examines the company’s tax position.
Less paperwork should not become less discipline.
Intangible Assets Are an Important Exception
Not every low-value transaction benefits from the new threshold.
The Danish Tax Agency specifically states that the DKK 5 million and DKK 50 million thresholds do not apply in the normal way to transactions concerning intangible assets.
That is significant because intellectual property can be difficult to value and can have a major impact on where profits arise.
Intangible assets can include rights involving areas such as:
- Patents
- Trademarks
- Technology
- Copyright
- Proprietary knowledge
- Other valuable intellectual property
A transaction involving the transfer or use of an intangible could therefore remain subject to documentation requirements even when the monetary amount appears relatively small.
Businesses should not assume that falling below DKK 5 million automatically ends the analysis.
They need to look at what the transaction actually involves.
Certain Non-EU and Non-EEA Transactions Are Also Treated Differently
Another exception concerns particular international transactions outside the EU and EEA.
According to the Danish Tax Agency, the new thresholds do not provide the same exemption for transactions involving countries outside the EU or EEA where Denmark does not have an agreement providing assistance in tax matters.
This reflects the greater enforcement difficulties that can arise when transactions involve jurisdictions where Danish tax authorities have limited access to information or cooperation.
For multinational companies, geography therefore matters.
Two transactions of identical value could potentially create different documentation consequences depending on where the related party is located.
Businesses should map both the amount and the jurisdiction of controlled transactions before deciding that documentation is no longer required.
Dividends Have Also Been Removed From Documentation
The reform contains another useful simplification.
The Danish Tax Agency says businesses no longer need to submit transfer pricing documentation for dividends and other unilateral corporate-law dispositions.
This recognises a distinction between genuine transactions between related parties and certain corporate decisions that are not negotiated exchanges in the same sense.
For affected companies, removing these items can further simplify the annual transfer pricing process.
It also demonstrates the broader objective behind the reform: focusing detailed documentation requirements more closely on transactions where transfer pricing analysis provides meaningful tax information.
Denmark Expects DKK 67 Million in Annual Savings
The government attempted to quantify the administrative effect when the legislation was introduced.
According to the explanatory material submitted to Parliament, approximately 10,000 businesses had indicated that they were subject to transfer pricing documentation requirements for the 2022 income year.
The government estimated that the revised rules would remove at least 1,500 businesses from the requirement to prepare and submit documentation.
The legislative package was estimated to produce approximately DKK 67 million in annual administrative savings for businesses.
That figure helps explain why the reform matters beyond tax specialists.
Preparing transfer pricing documentation can require internal finance staff, management information, economic analysis and external professional assistance.
For a smaller company with only limited cross-border group transactions, those costs can be significant compared with the value of the transactions being documented.
Reducing unnecessary documentation can therefore release resources for other business activities.
Smaller Groups Already Have Separate Relief
The DKK 5 million and DKK 50 million thresholds are not the only limits companies need to understand.
Denmark also has a system of limited documentation obligations for smaller groups.
According to the Danish Tax Agency, limited documentation rules can apply to taxpayers that, alone or together with related businesses, have fewer than 250 employees and either:
- A total annual balance sheet below DKK 195 million, or
- Annual turnover below DKK 391 million
For qualifying businesses, documentation is generally limited to particular controlled transactions involving parties or permanent establishments in certain countries outside the EU and EEA.
The interaction between these rules and the newer transaction thresholds means companies should avoid making decisions based on a single number.
Group size, transaction value, balance-sheet exposure, jurisdiction and transaction type can all matter.
Foreign Companies With Danish Permanent Establishments Should Check Their Position
The rules are not limited to Danish incorporated companies.
A foreign company or individual with a permanent establishment in Denmark can also fall within Denmark’s transfer pricing documentation regime.
This is especially relevant to international businesses operating in Denmark without establishing a separate Danish subsidiary.
A foreign business might have an office, branch or another fixed business presence that creates a Danish permanent establishment.
Once that happens, questions arise about how much profit should be attributed to the Danish activity.
Transfer pricing principles can play an important role in that calculation.
International companies should therefore consider permanent establishment and transfer pricing together rather than treating them as completely separate tax issues.
The Filing Deadline Still Matters for Companies in Scope
Businesses that remain subject to documentation requirements need to pay close attention to filing deadlines.
For income years beginning on or after January 1, 2021, Danish transfer pricing documentation generally has to be submitted to the Danish Tax Agency no later than 60 days after the deadline for the company’s tax information return.
A useful change applies from the 2025 income year.
If a company receives an extension of its deadline for the tax information return, the Danish Tax Agency states that the deadline for submitting transfer pricing documentation is extended accordingly.
That can simplify deadline management for companies dealing with complex year-end reporting.
But businesses should first determine correctly whether they remain subject to documentation at all.
What Should International Companies Review?
The new thresholds provide a good reason for multinational groups to reassess their Danish transfer pricing position.
A practical review could include:
- Calculate total cross-border controlled transactions
- Calculate controlled receivables and liabilities at year-end
- Identify transactions involving intangible assets
- Identify the jurisdictions of all related parties
- Check whether any relevant countries fall within the special non-EU or non-EEA rules
- Determine whether the company qualifies for limited documentation rules
- Review permanent establishment arrangements
- Confirm whether dividends or other unilateral corporate dispositions were previously included
- Check the applicable filing deadline
- Keep evidence supporting arm’s-length pricing even where formal documentation is no longer required
Companies should document the reasoning behind their conclusion about whether they are exempt.
That can be useful if circumstances change or the position is later questioned.
Growing Businesses Need to Watch the Thresholds
A company that qualifies for relief this year may not qualify next year.
Imagine a Danish subsidiary whose cross-border controlled transactions total DKK 4.5 million.
A new management-services agreement or additional purchases from its foreign parent could push the total above DKK 5 million.
Controlled debt can also change quickly.
A group loan introduced near the end of the year could push controlled receivables and liabilities above the DKK 50 million threshold.
Businesses close to either limit should therefore monitor their position during the year rather than discovering after year-end that documentation was required.
Less Paperwork, But Not Less Tax Responsibility
Denmark’s reform is a meaningful simplification for smaller businesses operating across borders.
At least 1,500 companies were expected to leave the annual transfer pricing documentation regime, with SMEs making up most of the beneficiaries.
For qualifying companies, that can mean lower advisory costs, fewer reporting demands and less time spent preparing master and local documentation.
But the relief needs to be understood correctly.
Denmark has reduced a documentation requirement, not abandoned the arm’s-length principle.
Related businesses must still conduct transactions on appropriate terms. Intangible assets and certain international transactions remain subject to special treatment. Growing companies also need to monitor whether they cross the new thresholds.
The best outcome for international businesses is therefore not simply to stop preparing documents.
It is to determine confidently whether documentation is required and, where it is not, maintain enough evidence to demonstrate that cross-border related-party transactions still make commercial and tax sense.
For many smaller international companies operating in Denmark, that could deliver exactly what the reform was designed to achieve:
less administrative work without weakening the underlying tax rules.
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