An Analysis of OECD’s Updated Requirement to Transfer Pricing Documentation from a Danish Perspective

Peter Wrist-Knudsen

Student thesis: Master thesis


Throughout the past few decades, globalization has increased due to a rapid development within the industries of technological digitalization, logistics and transport. These industries have contributed to better communication tools and more cost-efficient transportation of services and commodities, which combined with more international free trade zones have made it possible for the multinational enterprises (MNEs) to expand their market shares. The divergence in the countries’ tax policies and tax rates have most likely lead several MNEs to speculation with aggressive tax planning. With entities spread all over the world, the MNE can shift valuable assets and profit (through controlled transactions) from high tax jurisdictions to low or no-tax jurisdictions. Hence, the Organisation of Economic Cooperation and Development (OECD) saw the need for an update of their Transfer Pricing Guidelines from 2010, and the solution became the Base Erosion and Profit Shifting (BEPS) project. With the final BEPS action plan in 2015, OECD had 15 actions that aimed to avoid exploitation of gaps and mismatches in tax rules. Action 13 addresses the documentation of transfer pricing, and the implementation of action 13 has lead to changes in chapter 5 in OECD’s Transfer Pricing Guidelines. These changes involve a three-tiered documentation: a Master File, a Local File and a Country-by-Country (CbC) report. The Master files provides an overview of the MNE’s business, the Local file provides information regarding the relevant transactions for the local entity and the CbC report provides information about each tax jurisdiction in which they do business. Danish legislation implemented the three-tiered documentation in spring and autumn 2016. The Master file and the Local file is elaborated in the announcement “Bekendtgørelse om dokumentation af prisfastsættelsen af kontrollerede transaktioner” with legal basis cf. SKL § 3B, stk. 5. The CbC report is elaborated in the announcement “Bekendtgørelse om land for land-rapportering” with legal basis cf. SKL § 3B, stk. 10. Besides action 13, actions 8–10 have contributed with changes in chapter 1 (arm’s length principal) and chapter 6 (intangible assets) of OECD’s Transfer Pricing Guidelines. These changes have an effect on the identification of the entities in an MNE group that added value to intangible asset. This paper examines the impact of the updated documentation on the Danish tax authority and the Danish MNEs in regard to a potential administrative and economical burden for both parties. Moreover, it will deliver the indented solutions and create a more fair tax or rather bring more tax disputes in the future.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2017
Number of pages96