Denmark Country Profile

Denmark Country Profile

Key tax factors for efficient cross-border business and investment involving Denmark.

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EU Member State

Yes.

Double Tax Treaties

With:

Argentina Estonia Jersey Pakistan Turkey 
Armenia Faroe Islands
Jordan Philippines Uganda
Australia Finland
Kenya Poland UK
Austria Georgia
Rep. of Korea Portugal Ukraine
Bangladesh Germany
Kuwait Romania US
Belarus
Greece
Kyrgyzstan Russia Venezuela
Belgium Greenland
Latvia Serbia Vietnam
Bermuda Guernsey
Lebanon Singapore Zambia
Brazil Hong Kong
Lithuania Slovakia  
British Virgin Islands Hungary
Luxembourg Slovenia  
Bulgaria Iceland
Macedonia South Africa  
Canada India
Malaysia Sri Lanka  
Cayman Islands Indonesia
Malta Sweden  
Chile Rep. of Ireland
Mexico Switzerland  
China Isle of Man
Montenegro(a) Taiwan  
Croatia Israel
Morocco Tanzania  
Cyprus Italy
Netherlands Thailand  
Czech Rep. Jamaica
New Zealand Trinidad &
Tobago
 
Egypt Japan
Norway Tunisia  

Note: (a) Treaty signed with former Yugoslavia applies.

Czech Rep.
Czech Rep.
Czech Rep.
Egypt

Forms of doing business

Public Limited Company or Stock Corporation (Aktieselskab - A/S),

Private Limited Company (Anpartsselskab - ApS).

Legal entity capital requirements

A/S: DKK 500,000,

ApS: DKK 50,000.

Residence and tax system

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.

Compliance requirements for CIT purposes

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.

Tax rate

22 percent (2016 onwards).

Withholding tax rates

On dividends paid to non-resident companies

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.

On interest paid to non-resident companies

As a general rule no WHT on interest payments applies. However, a 22 percent WHT applies to interest payments on "controlled debts".

On patent royalties and certain copyright royalties paid to non-resident companies

22 percent / possible exemption.

On fees for technical services

No.

On other payments

No.

Branch withholding taxes

No.

Holding rules

Dividend received from resident/non-resident subsidiaries

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).

Capital gains obtained from resident/non-resident subsidiaries

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.

Tax losses

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.

Tax consolidation rules/Group relief rules

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.

Registration duties

No.

Transfer duties

On the transfer of shares

No.

On the transfer of land and buildings

Yes.

Stamp duties

Yes.

Real estate taxes

Yes.

Controlled Foreign Company rules

Yes - CFC taxation may be triggered if there is:

  • Controlling interest (a majority of votes);
  • Substantial financial income (more than 50 percent of total net income) and financial assets account – on average – for more than 10 percent of the total assets.

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.

Transfer pricing rules

General transfer pricing rules

Yes.

Documentation requirement

Yes.

Thin capitalization rules

Yes, 4:1 debt-to-equity ratio. In addition, also interest ceiling rule and EBIT-rule.

General Anti-Avoidance rules (GAAR)

Anti-avoidance rules targeting double-dip structures and applying a beneficial ownership approach.

Specific Anti-Avoidance rules/Anti Treaty Shopping Provisions

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 Ruling system

Advance binding rulings may be applied to specific transactions or arrangements, either planned or completed.

IP / R&D incentives

Yes.

Other incentives

No.

VAT

25 percent flat rate.

Other relevant points of attention

No.

Contact us

Martin Reng

KPMG in Denmark

T: +45 3078 6682

E: martin.reng@kpmg.com

 

Birgitte Tandrup

KPMG in Denmark

T: +45 5374 7053

E: birgitte.tandrup@kpmg.com

 
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