Denmark: Taxpayer prepared adequate transfer pricing documentation and related party payments were arm’s length (Supreme Court decision)

The Danish Supreme Court on January 9, 2025, held that the taxpayer had prepared adequate transfer pricing documentation in respect of two intra-group transactions under dispute in the case—(1) payments under an intra-group employee secondment arrangement, and (2) royalty payments to a related entity for use of that entity’s intangible assets. Thus, the court rejected the Ministry of Taxation’s argument that the taxpayer’s transfer pricing documentation could be disregarded, and a discretionary income adjustment imposed.

The court further held based on the taxpayer’s transfer pricing documentation that:

• Payments by the taxpayer under the intra-group employee secondment arrangement computed using a markup including both additional costs beyond the base price (hourly wage) incurred by the lending entity and a profit from the leasing were arm’s length.
• Royalties paid by the taxpayer to a related entity for use of that entity’s intangible assets were arm’s length, and the related entity was both the economic and legal owner of such intangible assets.

Read a January 2025 report prepared by the KPMG member firm in Denmark

Rune Meldgaard Christensen | rune.christensen@kpmg.com

Henrik Lund | henrik.lund@kpmg.com

Peder Reuther | peder.reuther@kpmg.com

Michael Villinger | michael.villinger@kpmg.com