Denmark: Tax incentives for hydrocarbon activities | KPMG | GLOBAL

Denmark: Tax incentives for hydrocarbon activities, draft bill

Denmark: Tax incentives for hydrocarbon activities

The Danish Ministry of Taxation on 26 June 2017, published a draft bill to implement a political agreement regarding tax incentives for the development of the Danish hydrocarbon activities in the North Sea.

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The draft bill is subject to a public hearing (consultation) until 14 August 2017. Following this, the bill will be submitted to the Danish Parliament, expected in early October 2017 when the Parliament returns from its summer holidays. Passage would be expected during October - November 2017.

Tax incentives

The tax incentives are similar to those outlined in a March 2017 press release regarding the political agreement. There are now more details about the mechanics of the new incentive rules. 

In essence Danish hydrocarbon companies (branches) would continue to be taxed according to the following rules:

  • Ordinary (other) income (22% corporate income tax rate)
  • Hydrocarbon Chapter 2 corporate tax income (25% tax rate)
  • Hydrocarbon Chapter 3 A income (52% tax rate)

The proposal introduces a new Chapter 3 B that would provide certain extra deductions allowed in the calculation of the Chapter 3 A taxable income. The incentive would be applicable to all entities subject to hydrocarbon tax under Chapter 3 A, but the incentive would only apply to the hydrocarbon “tax layer”—i.e., the 52% hydrocarbon taxation. The corporate “tax layer” (25%) would not be subject to or covered by the incentive.

 

Read a July 2017 report [PDF 591 KB] prepared by the KPMG member firm in Denmark

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