Tax Authorities' Discretionary Assessment of Transfer Pricing in Case of Insufficient Documentation

Abstract

This master thesis examines the legal implications that arise in connection with legal issues concerning the discretionary assessments in the field of transfer pricing, which are carried out due to significant inadequate documentation. By legal implications, reference is made to the legal frameworks, applicable law, legal principles, guidelines, and other frameworks that form the basis for how discretionary assessments are handled. Furthermore, it is examined how discretionary assessments are conducted in practice and how this relates to the legal frameworks for the area. Furthermore, the master's thesis is conducted based on a deductive methodological approach. The examination of the above is carried out using a legal dogmatic method, with the aim of identifying, structuring, and systematizing applicable law.Through an analysis of the Accenture case in High Court and Supreme Court it is analyzed how discretionary assessments, documentation requirements, and the burden of proof are interconnected. The analysis contributes to the understanding of how discretionary assessments largely depend on the parties' documentation when the burden of proof must be met.The case analysis forms the basis for the discussion section of the thesis. In the discussion, the understanding gained from practice is compared with the theoretical foundation upon which the thesis is built. Through the discussion, an attempt is made to illuminate how the Accenture case helps to interpret and clarify the applicable law. Furthermore, it is discussed how the principles of legality and proportionality should be observed by the Danish tax authorities in their exercise of discretionary assessments. Finally, it is discussed how the Accenture case can be attributed to precedential value in similar cases going forward.The conclusion to the problem statement is not unambiguous, as there are a number of principles and applicable laws that must be observed by both the taxpayer and the tax authorities when making discretionary assessments of controlled transactions. However, the analysis and discussion cement that well-prepared and well-documented transfer pricing documentation, which complies with the formalized requirements, carries more weight than technicalities in the documentation. Furthermore, it is clear that it is not only the taxpayer who must document the transaction, but that the tax authorities are increasingly held accountable through stricter burden of proof requirements for the discretionary assessments they make on controlled transactions.