In October 2025, the Danish Tax Court (Landsskatteretten) issued a ruling, SKM2025.590. LSR, confirming the decision of the Danish Tax Authority (Skattestyrelsen) to disregard the tax effects of an intra-group restructuring carried out by Group H, considering that the transaction lacked economic substance and was primarily for tax purposes.
The dispute arose from the internal transfer of shares among related companies, financed by an intercompany loan of DKK 100 million. The authority argued that, despite the formality of the contracts, there was no real economic risk or verifiable business reason to support the transfer of capital.
Background and Position of the Parties
The H Group, owned by the same family, had created three new holding companies to optimize its business structure and reduce media exposure of its investments. In December 2013, one of the group’s companies (H1 A/S) transferred its shares in a foreign company (G2 A/S) to these new entities. The transaction was priced at DKK 100 million, which was financed through an internal loan among the group’s own companies.
The group argued that the transaction did not generate any real tax benefit, as the interest on the loan was taxed in Denmark and the corresponding deductions did not generate any immediate advantages. According to their position, they intended to reorganize the ownership structure to strengthen corporate governance without affecting the effective tax burden.
Conversely, the Skattestyrelsen concluded that the scheme allowed for the artificial redistribution of tax losses within the group, particularly through the use of interest deductions in corporations with loss carryforwards. For the administration, this was a transaction without an actual economic basis, designed to take advantage of the tax consolidation regime (sambeskatning).
Court Arguments and Decision Grounds
The Tax Court upheld the authority’s decision, noting that the intercompany loan did not involve genuine financial risk. Additionally, the claimed business purposes, such as reducing media exposure or facilitating management, were insufficient to justify the tax recognition of the transaction.
According to the ruling, the debt assumed by the new companies was purely formal, as they did not demonstrate their ability to pay, nor the existence of actual financial obligations to third parties. Furthermore, the companies involved belonged to the same family group, acting under common control; therefore, the transaction had to be assessed jointly as a “closed agreement” or lukkede aftalekompleks, usual in structures designed for tax purposes.
The Court cited previous case law, such as cases SKM2009.168.HR and SKM2014.422.HR, where the Danish Supreme Court established that related-party transactions must have economic substance and a verifiable commercial purpose. It also reiterated that accounting or contractual related-party adjustments cannot be recognized for tax purposes if their principal purpose is to modify the tax burden without a substantive economic change.
Relevance from a Transfer Pricing Perspective
Although the case does not directly address a traditional Transfer Pricing adjustment, its analysis aligns with the OECD’s Arm’s Length Principle. The Court assessed the lack of actual risk, the absence of conditions comparable to independent transactions, and the lack of documentation supporting a legitimate commercial reason.
Regarding Transfer Pricing, the ruling reinforces the idea that intragroup transactions must be supported by documented economic justification, both for the valuation of assets and for the allocation of risks and benefits. Companies must demonstrate that transactions are based on consistent business logic rather than an internal tax optimization strategy.
Moreover, the case illustrates how European tax authorities-especially in jurisdictions with a high degree of transparency-apply the principle of “substance over form,” prioritizing economic reality over legal appearance.
Economic and Evidentiary Analysis
During the proceedings, the Danish authority pointed to the lack of documentary evidence to support the group’s stated grounds. There were no independent appraisal reports, board minutes, or financial studies that support the need for the loan or the operational benefit of transferring the shares.
The Court also noted accounting inconsistencies, such as the use of different appraisal principles among the group’s entities, which hindered the determination of the actual effect of the transaction on the consolidated results. In this context, it concluded that the only tangible effect was the creation of tax deductions without any related financial risk.
This approach reflects a global trend in tax matters: Courts and tax administrations are increasingly assessing the economic substance, the actual role of the parties, and the net financial impact of transactions to determine whether they are legitimate from a Transfer Pricing perspective.
Implications for Intragroup Restructuring
The Danish ruling has a broader scope than the specific case, confirming that internal reorganizations within family or business groups must be carefully planned and documented, demonstrating their economic rationale, operational effect, and consistency with business objectives.
Multinational companies should anticipate that tax authorities will demand solid evidence of the non-tax reasons behind transactions, especially when these involve loans, asset disposals, or share transfers.
In this regard, a Transfer Pricing file is crucial, which must include functional analysis, comparability of interest rates or financial conditions, valuation studies, and consistent accounting records among the entities involved.
Conclusion
The Denmark vs. Holding A/S case sets an important precedent on the application of the economic substance principle in intra-group restructurings. The Court reaffirms that related-party transactions, although valid in their legal form, will have no tax effect if they lack a real commercial purpose or generate only internal tax benefits.
For multinational groups, this ruling underscores the importance of responsible tax planning, supported by technical documentation and verifiable economic evidence. In the current international context, characterized by greater cooperation between tax administrations and controls based on BEPS guidelines, transparency and business consistency are essential to avoid Transfer Pricing adjustments or disputes.
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Source: TPCases