Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Denmark

Denmark has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) and no recommendations are made.

Denmark can legally issue five types of rulings within the scope of the transparency framework.

In practice, Denmark has issued 43 past rulings; for the period 1 April 2016 - 31 December 2016, Denmark issued seven future rulings; and for the year in review, Denmark issued 17 future rulings within the scope of the transparency framework.

Peer input was received from three jurisdictions in respect of the exchanges of information on rulings received from Denmark. The input was generally positive, noting that information was complete in the correct format. One peer noted one exchange delay with respect to future rulings.

Introduction

360.  This peer review covers Denmark’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

361.  Denmark can legally issue the five following types of rulings within the scope of the transparency framework: (i) rulings related to preferential regimes (tonnage tax); (ii) cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) downward adjustments; (iv) permanent establishment rulings; and (v) conduit rulings. Rulings are issued by the tax administration and, in cases where the matter is of general public interest, by the Tax Assessment Council as referred by the tax administration. These rulings are published in anonymised form on the tax administration’s website when they are deemed of general public interest.1 Denmark notes that in practice downward adjustments are rarely issued as such rulings are conditional on a corresponding upward adjustment being made in the other jurisdiction.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

362.  For Denmark, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

363.  In the prior year peer review report, it was determined that the Danish tax administration’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. The Danish tax administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

364.  For Denmark, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

365.  In the prior year peer review report, it was determined that the Danish tax administration’s system to identify future rulings and all potential exchange jurisdictions was sufficient to meet the minimum standard. The Danish tax administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Review and supervision mechanism (ToR I.4.3)

366.  In the prior year peer review report, it was determined that the Danish tax administration’s review and supervision mechanism was sufficient to meet the minimum standard. The Danish tax administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

367.  Denmark has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

368.  Denmark has the necessary domestic legal basis to exchange information spontaneously. Denmark notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard. Although there is a legal requirement to notify all concerned taxpayers before the exchange of information, Denmark notes that such notification process does not prevent exchange, but implies that exchange of information has to await the time by which it can be expected that the notification is received by the taxpayer.

369.  Denmark is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) double tax agreements in force with 69 jurisdictions.2

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

370.  In the prior year peer review report, Denmark’s process for the completion and exchange of templates was described. Since then, Denmark has made a separation of duties so that the employees responsible for processing the rulings are not involved in the process of exchange of information on the rulings. In addition, for the year in review Denmark commenced using the OECD XML Schema for exchanges. The process is substantially the same as it was for the completion of the template in Annex C of the 2015 Action 5 Report (OECD, 2015). The appointed employees responsible for the exchange of information will, instead of filling in the template, enter the data in the OECD XML Schema by use of the European Commission’s Central Directory (CD) database. The Schema will not be saved in the CD but will be exported and saved as an XML file in the filing system at the tax administration. Immediately thereafter, the XML file will be sent to the Competent Authority.

371.  Denmark notes that the summary section contains a translation of the summary sent to the National Tax Board, such as the key conclusions reached by the tax authority in issuing the ruling and the tax administration’s view of the interpretation of the tax law if it is different from the taxpayer’s interpretation. It is noted that the internal FHTP suggested guidance will be incorporated into the process in the future.

372.  For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	32	0	N/A	These relate to the delayed exchanges reported in the prior year peer review report, and which were exchanged by February 2017
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	25	0	N/A	One exchange concerns a future ruling issued in 2016 occurred in February 2017 – within about four months of the ruling being issued but within three months of the information becoming available to the competent authority
Total	57	0

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	N/A	N/A

373.  Denmark notes that one exchange concerns a future ruling issued in 2016 and for which the exchange occurred in February 2017. This was within about four months of the ruling being issued but within three months of the information becoming available to the competent authority. Information on this ruling should have been transmitted to two jurisdictions and the exchange was made only to one by mistake initially. The information on this ruling was re-submitted to the additional jurisdiction in February 2017. As such, this is a minor error which was remedied quickly.

Conclusion on section B

374.  Denmark has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed all exchanges on time. Denmark has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

375.  The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to preferential regimes	Included in de minimis	N/A
Cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	7	Canada, Iceland, Lithuania, Luxembourg, Norway, Sweden, United Kingdom
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	0	N/A
Permanent establishment rulings	43	Austria, Canada, France, Germany, Ireland, Italy, Jersey, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Sweden, United Kingdom, United States
Related party conduit rulings	Included in de minimis	N/A
De minimis rule	7	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	N/A	N/A
Total	57

D. Matters related to intellectual property regimes (ToR I.4.1.3)

376.  Denmark does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  Available at www.skat.dk/skat.aspx?oid=80859&ik_navn=transport (accessed 20 November 2018).

← 2.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Denmark also has bilateral agreements in force with Argentina, Australia, Austria, Bangladesh, Belarus, Belgium, Brazil, , Bulgaria, Canada, Chile, China (People’s Republic of), Croatia, Cyprus, Czech Republic, Egypt, Estonia, Former Yugoslav Republic of Macedonia, Georgia, Germany, Ghana, Greece, Hungary, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kenya, Korea, Kuwait, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Montenegro, Morocco, Netherlands, New Zealand, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Sri Lanka, Switzerland, Chinese Taipei, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Kingdom, United States, Venezuela, Viet Nam and Zambia. Denmark also has a Tax Information Exchange Agreement permitting spontaneous exchange of information with Aruba.

Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union. The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.