Key tax factors for efficient cross-border business and investment involving Denmark.
||Rep. of Korea||Portugal||Ukraine|
|British Virgin Islands||Hungary
|Chile||Rep. of Ireland
|China||Isle of Man
||New Zealand||Trinidad &
Note: (a) Treaty signed with former Yugoslavia applies.
Public Limited Company or Stock Corporation (Aktieselskab - A/S),
Private Limited Company (Anpartsselskab - ApS).
A/S: DKK 500,000,
ApS: DKK 50,000.
A company is resident if it has been incorporated in Denmark or if the place of effective management is in Denmark. A territorial income condition applies for resident companies. Generally speaking, income from permanent establishments and foreign property is not included in a company's taxable income. However, the worldwide tax liability applies: if a group has opted for international joint taxation (see below); if there is a Controlled Foreign Company (CFC) tax liability (see below). The following are also subject to taxation: international shipping and air transport activities; foreign dividends, interest and royalties.
Filing of : CIT return, appendix to tax return concerning controlled ransactions (if applicable) and of Tax Statements (if applicable), assessment of joint taxable income (if applicable) and group structure chart (if applicable). On account CIT payments are due on March 20 and November 20.
22 percent (2016 onwards).
The general WHT rate is 27 percent. Under most tax treaties the rate is reduced to 15 percent by reclaim.
Reduction at source for non-Danish entities is only available when the parent-sub directive applies in which case the participation exemption implies that no WHT is due (0 rate) or if a Danish tax exemption certificate has been issued to the payee (available for certain sovereign funds, etc.). Please Refer below section I.a.
As a general rule no WHT on interest payments applies. However, a 22 percent WHT applies to interest payments on "controlled debts".
22 percent / possible exemption.
Exemption (100 percent) applies to dividends from subsidiary shares (10 percent or more participation and the subsidiary is located in an EU or treaty
country. According to a proposal, this will also apply to subsidiaries located innon-EU or non-treaty countries if there is an exchange of tax information agreement in place and the company is subject to tax in the country of residence) and to dividends from group company shares (majority of votes).
Exemption if realized on subsidiary shares and group company shares (conditions as for dividend exemption). From 2013 exemption also applies to qualified non-listed shares regardless of ownership share.
Losses from a business activity can be offset against positive income and may be carried forward indefinitely. A change in ownership (more than 50 percent) may restrict this so that the losses may not be used to reduce the taxable income below the net income from capital.
Losses carried forward from previous years exceeding DKK 7,852,500 (2016) can only be used to reduce future income with 60 percent.
Joint taxation is mandatory for Danish group companies, Danish PEs, and Danish property. Group relation exists if the ultimate owner of more than one Danish entity holds more than 50 percent of the equity or voting rights of the Danish entity.
International joint taxation continues to be optional.
Where it is elected, all foreign and Danish group companies and PEs/property must be included in the international joint taxation. This also applies to foreign parent/related companies.
The value of foreign tax losses deducted in Danish international taxation will be added to a balance of account (retaxation balance). Generally, the election for international joint taxation will be binding for a period of 10 years. If the joint taxation is discontinued during this period, the retaxation balance will be subject to full retaxation. If the joint taxation is discontinued at the end of the 10-year period, the amount subject to retaxation is calculated on the basis of a fictitious liquidation profit, maximized to the tax value of the losses deducted.
Foreign taxes paid by subsidiaries participating in international joint taxation can be offset against Danish taxes using the credit method. This applies irrespective of possible exemption provisions in a double tax treaty.
Yes - CFC taxation may be triggered if there is:
CFC taxation applies irrespective of where the subsidiary is resident and irrespective of the level of taxation. If a company qualifies as a CFC, all the company’s income will be subject to taxation at the parent company level. The parent is granted a credit for income tax paid by the CFC.
Yes, 4:1 debt-to-equity ratio. In addition, also interest ceiling rule and EBIT-rule.
Anti-avoidance rules targeting double-dip structures and applying a beneficial ownership approach.
The General Anti-Avoidance Rules in the Parent-Subsidiary Directive have
been implemented in the Danish Tax Assessment Act, effective from May
1, 2015. The scope of the rules is broader than the scope of the rules in the Directive, since they will apply also to interest and royalties, tax-exempt mergers and tax treaties. The exact extent, however, is still to be established in practice.
Advance binding rulings may be applied to specific transactions or arrangements, either planned or completed.
25 percent flat rate.
KPMG in Denmark
T: +45 3078 6682
KPMG in Denmark
T: +45 5374 7053