Teoretisk og praktisk analyse af danske selskabers TP dokumentations- og oplysningskrav

Henrik Rask Søgaard

Student thesis: Master thesis


This paper analysis and illustrates the transfer pricing (TP) documentation and disclosure requirements for a Danish parent company when conducting controlled transactions during its daily operations with its subsidiaries and when conducting a business reconstruction. It is clarified, that the Danish TP rules are to be understood in connection with OECD’s TP guidance, which recently have undergone rapid developments and changes leading into detailed TP guidance. For a multinational enterprise (MNE) to prepare a thorough TP documentation – it must prove that its controlled transactions do differ neither in their commercial or in their financial relations from those, which would be made between independent companies1 (the arm’s length principle). This requires the preparation of a comparability analysis and the selection of the most appropriate TP method. The comparability analysis establishes the degree of actual comparability – between controlled and independent transactions - by clarifying attributes that would affect conditions in arm’s length transactions. The analysis is shown to comprise 5 factors, which imply elements of judgment and requires very detailed descriptions of the actual undertakings and of the context in which these undertakings are performed. The functional analysis is proven to be the factor which regulator’s puts most emphasis on. The selection of the most appropriate TP method - to compare the controlled transaction with independent transactions – requires the selection of the TP method, which depending on the circumstances is most appropriate. The paper analysis the strengths and weaknesses of OECD’s 5 TP methods. Furthermore, the paper analysis aspects of particular relevance to business reconstructions. It is shown that business reconstructions tend to involve a higher degree of uncertainty in determining arm’s length conditions, increasing the risks for inappropriate allocation of profits. This is illustrated to require special considerations to be undertaken. Additionally, the paper analysis the process, which has led to OECD’s preparation of 3 standardized TP reports, which MNEs are to use in their TP documentation. It is demonstrated how these reports will give tax authorities an overall insight in the group’s operations with respect to TP, enabling tax authorities better to conduct thorough TP risk assessments, which in turn force MNEs to prepare thorough and exhaustive TP documentation. With the use of a self-developed business case and the theoretical framework described above, the paper makes a practical illustration of how to prepare a thorough TP documentation ensuring linkage between the description of the actual undertakings of each company in the group and the distribution of profits related to its controlled transactions between the companies in the group. Additionally, it is shown how the aforedescribed thorough TP documentation is maintained when the group is affected by a business reconstruction. This involved an analysis of the aspects, which must be taken into account, in deriving the compensation, which will satisfy the involved tax authorities for the changes to the expected future returns, because of the changes to the functions undertaken, assets used and risks assumed by the affected parties.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2015
Number of pages84