Denmark Tightens Taxation of Dividends

Denmark Tightens Taxation of Dividends

In the beginning of October the Danish government presented to the parliament a bill containing measures to prevent the circumvention of Danish and foreign taxation.

The most significant measures in the bill are the following:

1) Intragroup transfers of shares to be treated as dividends subject to dividend taxation where the remuneration for the transfer is entirely or partly not in the form of shares:

• where the transferring company is nonresident, the transfer could cause a 27% Danish withholding tax if the taxation cannot be eliminated or reduced under the EU parent-subsidiary directive or an applicable tax treaty;

• where the transferring company is Danish resident, the 27% dividend withholding tax to apply if the transferor is unable to receive tax-exempt dividends (i.e. it owns less than 10% of the share capital of the transferring company).

2) There will be no possibilities to use Denmark as a conduit country: the 27% Danish dividend withholding tax to be imposed on dividends declared on or after January 01, 2013 if the Danish company is not the beneficial owner of dividends received directly or indirectly on subsidiary or group shares and the declared dividend is exempted under the EU parent-subsidiary directive. International groups using Denmark as a conduit country should consider their structures till January 01, 2013.

3) The Danish tax liability rule depending on the registration place to be expanded in order to include any company registered with the Central Business Registry. Currently the tax liability of a company, other than a public or private limited company, depends on the fact if the company has its effective place of management in Denmark. According to the proposal, both place of effective management and place of registration residence criteria to be applied to such companies for tax purpose.

The bill presented by the government has been released for public consultation.

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