On June 3, 2025, the Danish Parliament (Folketinget) passed Law No. 750 of 2025, which significantly amends Transfer pricing documentation requirements. This reform primarily aims to reduce the administrative burden on small and medium-sized enterprises (SMEs) while maintaining the principles of transparency and international tax compliance.
The measure became effective for fiscal years beginning on or after April 2, 2024, and will apply formally in the 2025 fiscal year.
Regulatory Background and Objectives of the Reform
As a result of this amendment, Denmark continues to adjust its tax framework to balance international compliance requirements along with the competitiveness of domestic businesses. The decision to relax the documentation requirement is based on the need to align regulatory costs with the size and risk level of taxpayers. This amendment would exempt over 1,500 companies from filing Transfer Pricing documentation.
New Thresholds for the Documentation Requirement
One of the most significant amendments introduced by the reform is the increase in the financial thresholds determining the obligation to prepare Transfer Pricing documentation.
Under the new regime, a Danish company—individually or jointly with its associated companies—will be exempt from this obligation if it meets the following criteria:
- To have fewer than 250 employees.
- To have a total annual balance sheet below DKK 195 million (previously DKK 125 million), or
- To have an annual turnover below DKK 391 million (previously DKK 250 million).
Although these cases exempt companies from this obligation entirely, they may still be subject to limited documentation requirements, depending on the nature of their transactions.
De Minimis Rule
The reform also establishes a de minimis rule, also known as a materiality threshold, which excludes low-risk tax transactions from documentation requirements due to their limited scale. This concept is frequent in tax legislation and aims to focus compliance and inspection efforts on more profitable or complex transactions.
In Denmark, the de minimis rule exempts related-party transactions from preparing Transfer Pricing documentation when they do not exceed certain quantitative limits within a fiscal year. This exemption applies if the following conditions are met simultaneously:
- Total controlled transactions (excluding accounts receivable and payables) do not exceed DKK 5 million in the fiscal year.
- Controlled accounts receivable and payables at the fiscal year-end do not exceed DKK 50 million.
To determine compliance with these limits, only those transactions and balances within the scope of the documentation obligation should be considered.
It should be noted that this exemption does not apply in specific situations that are of high risk to the Danish tax base. Particularly, it does not apply when:
- The transactions relate to intangible assets covered by §40 of the Depreciation Act.
- The counterparty to the transaction does not belong to the European Union or the European Economic Area, and there is no tax information exchange agreement with Denmark.
These exceptions aim to ensure transparency, even in low-value transactions, when sensitive jurisdictions or high-risk tax assets are involved.
New Specific Exemptions
The legislation incorporates several additional exemptions, reducing the scope of the obligation to document intra-group transactions:
- Dividends, capital contributions, and similar transactions are exempt if paid through cash.
- In the case of transparent entities (e.g., partnerships or funds), there is no obligation to document transactions when:
- The taxpayer and its related companies own less than 5% of the capital and voting rights in the entity.
- The investments are made through transparent structures.
- There is no joint control agreement over the management of the entity.
These provisions aim to exclude passive investment structures or those without significant control from the application scope, reducing the unnecessary burden of documentation in low-risk tax scenarios.
Coordination with the Deadline for the Tax Information Form
Another relevant practical amendment is that, as of the reform, if a taxpayer obtains an extension to file the general tax information form (oplysningsskema), this extension will also automatically apply to the deadline for filing Transfer Pricing Documentation. This provision enhances the consistency of administrative deadlines, granting greater predictability for companies in their tax planning.
Entry into Force and Temporary Application
The reform becomes effective for fiscal years beginning on or after April 2, 2024, and will generally apply from the start of the 2025 fiscal year. According to the Danish Corporation Tax Act (§10, stk. 1), this date marks the beginning of the new conditions for the affected companies.
Conclusion
The relaxation of Transfer Pricing documentation requirements adopted by Denmark reflects a pragmatic evolution of the tax system, which recognizes the limitations of SMEs and optimizes the use of resources for both the administration and taxpayers. By increasing financial thresholds, implementing de minimis rules, and broadening exemptions, the country enhances its capability to target its inspection efforts on higher tax operations and structures.
For multinational groups and tax advisors, this amendment implies a need to review risk segmentation, adjust internal documentation policies, and ensure that cross-border transactions continue to comply with the Arm’s Length Principle, particularly in cases outside the scope of the new exemptions.
Source: https://www.retsinformation.dk/eli/lta/2025/750