Denmark
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All telephone calls to the persons in Denmark listed below should be made to the persons’ mobile telephone numbers. These persons no longer have office telephone numbers. Telephone calls to the office switchboard will be put through to the respective persons’ mobile telephone numbers.
Copenhagen
EY
Dirch Passers Allé 36
DK-2000 Frederiksberg
GMT +1
+45 73-23-30-00
Fax: +45 72-29-30-30
Email: copenhagen@dk.ey.com Copenhagen Denmark
Head of Tax, Denmark
Jan Huusmann
Mobile: +45 51-38-48-53
Email: jan.huusmann@dk.ey.com
International Tax and Transaction Services – Transaction Tax Advisory
Carina Marie G. Korsgaard
Jens Wittendorff
Mobile: +45 25-29-37-64
Email: carina.m.g.korsgaard@dk.ey.com
Mobile: +45 51-58-28-20
Email: jens.wittendorff@dk.ey.com
International Tax and Transaction Services – Transfer Pricing
Justin Breau
Henrik Arhnung
Mobile: +45 25-29-39-32
Email: justin.breau@dk.ey.com
Mobile: +45 51-58-26-49
Email: henrik.arhnung@dk.ey.com
International Tax and Transaction Services – Operating Model Effectiveness
Marc Schlaeger
Business Tax Advisory
Claus Pedersen
Inge Heinrichsen,
Financial Services Tax
People Advisory Services
Morten S. Dalsgaard
Indirect Tax and Customs
Mick Jørgensen
Global Compliance and Reporting
Kristian Nørskov Stidsen
Legal Services
Susanne S. Levinsen
Greenland
Carina Marie G. Korsgaard
Mobile: +45 51-58-28-22
Email: marc.schlaeger@dk.ey.com
Mobile: +45 25-29-64-70
Email: claus.pedersen@dk.ey.com
Mobile: +45 25-29-37-61
Email: inge.heinrichsen@dk.ey.com
Mobile: +45 51-58-27-71
Email: morten.s.dalsgaard@dk.ey.com
Mobile: +45 51-22-16-43
Email: mick.joergensen@dk.ey.com
Mobile: +45 25-29-52-59
Email: kristian.n.stidsen@dk.ey.com
Mobile: +45 25-29-35-99
Email: susanne.s.levinsen@dk.ey.com
Mobile: +45 25-29-37-64
Email: carina.m.g.korsgaard@dk.ey.com
Aarhus GMT +1
EY
Værkmestervej 25
DK-8000 Aarhus C
+45 73-23-30-00
Fax: +45 72-29-30-30
Email: aarhus@dk.ey.com Denmark
International Tax and Transaction Services – Transaction Tax Advisory
Søren Næsborg Jensen
Mobile: +45 25-29-45-61
Email: soeren.n.jensen@dk.ey.com
International Tax and Transaction Services – Transfer Pricing Henrik Morthensen
Indirect Tax and Customs
Asger H. Engvang
A. At a glance
Withholding
Mobile: +45 25-29-45-71
Email: henrik.morthensen@dk.ey.com
Mobile: +45 40-40-22-60
Email: asger.engvang@dk.ey.com
(a) The general withholding tax rate is 27%, and the recipient can apply for a refund depending on the final tax rate. A withholding tax of 0% normally applies to dividends paid to group companies. See Section B.
(b) The 22% rate applies to payments between related parties. The rate may be eliminated if certain conditions are met under the European Union (EU) Interest-Royalty Directive or a double tax treaty entered into by Denmark. See Section B.
(c) The rate is 0% for royalties paid for copyrights of literary, artistic or scientific works, including cinematographic films, and for the use of, or the right to use, industrial, commercial or scientific equipment. In addition, the rate may be reduced or eliminated if certain conditions are met under the EU Interest-Royalty Directive or a double tax treaty entered into by Denmark.
(d) A Danish branch office or a tax-transparent entity may be re-characterized as a Danish tax-resident company if the entity is controlled by owners resident in one or more foreign countries, the Faroe Islands, or Greenland and if either of the following circumstances exists:
• The entity is treated as a separate legal entity for tax purposes in the country or countries of the controlling owner(s).
• The country or countries of the controlling owner(s) are located outside the EU and have not entered into a double tax treaty with Denmark under which withholding tax on dividends paid to companies is reduced or renounced.
B. Taxes on corporate income and gains
Corporate income tax. A resident company is a company incorporated in Denmark. In addition, a company incorporated in a foreign country is considered a resident of Denmark if its day-to-day management is in Denmark.
All tax-resident companies that are part of the same group must be included in a Danish mandatory joint taxation arrangement, regardless of whether these companies are subject to full or limited tax liability in Denmark. This mandatory joint taxation comprises all Danish affiliated companies as well as permanent
Parent-Subsidiary Directive or a double tax treaty if the shares had been subsidiary shares. In both cases, the recipient of the dividends must be the beneficial owner of the dividends and, accordingly, is entitled to benefits under the EU Parent-Subsidiary Directive or a double tax treaty.
The final tax rate for nonresident companies is generally 22%, with a rate of 15% for certain portfolio shares. The applicability of the 15% tax rate is described under Capital gains (conditions for deriving tax-exempt capital gains on portfolio shares). The 15% rate applies for corporations resident in jurisdictions with which Denmark has entered into a treaty on double taxation or exchange of information (if the shareholding meets the requirements described under Capital gains). A claim for a refund for the difference between the withholding tax of 27% and the final tax rate may be filed with the Danish tax authorities.
Withholding tax on dividends from a Danish subsidiary to a foreign company applies in the case of a redistribution of dividends if the Danish company itself has received dividends from a morethan-10%-owned company in another foreign country and if the Danish company cannot be regarded as the beneficial owner of the dividends received. Correspondingly, it applies if the Danish company has received dividends from abroad through one or more other Danish companies. Such dividends are generally subject to withholding tax at a rate of 27%, of which 5% can be reclaimed unless all of the following conditions are met:
• The rate is reduced under a double tax treaty with Denmark or the recipient is covered by the EU Parent-Subsidiary Directive.
• The recipient is considered the beneficial owner of the dividends.
• The general anti-avoidance rule does not apply.
Interest paid. In general, interest paid to foreign group companies is subject to withholding tax at a rate of 22%. The withholding tax is eliminated if any of the following requirements are satisfied:
• The interest is not subject to tax or it is subject to tax at a reduced rate under the provisions of a double tax treaty. For example, if withholding tax on interest is reduced to 10% under a double tax treaty, the withholding tax is eliminated completely.
• The interest is not subject to tax in accordance with the EU Interest/Royalty Directive. Under the directive, interest is not subject to tax if all of the following conditions are satisfied:
— The debtor company and the creditor company fall within the definition of a company under Article 3 in the EU Interest/Royalty Directive (2003/49/EC).
— The companies have been associated (as stated in the directive) for at least a 12-month period.
— The recipient is beneficial owner of the interest received.
• The interest accrues to a foreign company’s permanent establishment in Denmark.
• The interest accrues to a foreign company, and a Danish parent company, indirectly or directly, is able to exercise control over such foreign company (for example, by holding more than 50% of the voting rights). Control must be fulfilled for a period of 12 months during which the interest is paid.
• The interest is paid to a recipient that is controlled by a foreign parent company resident in a country that has entered into a double tax treaty with Denmark and has CFC rules and if, under these foreign CFC rules, the recipient could be subject to CFC taxation.
• The recipient company can prove that the foreign taxation of the interest income amounts to at least ¾ of the Danish corporate income tax and that it will not in turn pay the interest to another foreign company that is subject to corporate income tax amounting to less than ¾ of the Danish corporate income tax.
The withholding tax and exceptions also apply to non-interestbearing loans that must be repaid with a premium by the Danish debtor company.
C. Determination of trading income
General. Taxable income is based on profits reported in the annual accounts, which are prepared in accordance with generally accepted accounting principles. For tax purposes, several adjustments are made, primarily concerning depreciation and write-offs of inventory.
Expenses incurred to acquire, ensure and maintain income are deductible on an accrual basis. Certain expenses, such as certain gifts, income taxes and formation expenses, are not deductible. Only 25% of business entertainment expenses is deductible for tax purposes. Expenses incurred on advisor fees are not deductible if they are incurred with respect to investments in shares that have the purposes of a full or partial acquisition of one or more companies and of the exercise of control over or participation in the management of these companies. From 1 January 2023, salary and salary substitutes that exceed DKK7,994,500 per person (2024 amount) are not deductible in calculating taxable income.
Inventories. Inventory may be valued at historical cost or at the cost on the balance sheet at the end of the income year. Inventory may also be valued at the production price if the goods are produced in-house. Indirect costs, such as freight, duties and certain other items, may be included.
Dividends received. Dividends received with respect to shares that qualify as group shares or subsidiary shares (see Capital gains) are exempt from tax to the extent that no tax deduction is claimed for the distribution by the entity making the distribution.
Dividends received by a Danish permanent establishment may be exempt from tax if the permanent establishment is owned by a foreign company that is tax resident in the EU, European Economic Area (EEA) or in a country that has entered into a double tax treaty with Denmark.
Dividends received on a company’s own shares are exempt from tax.
Seventy percent of the dividends that are not covered by the above tax exemption, such as dividends from unlisted portfolio shares, must be included in the taxable income of the dividend receiving company and taxed at the normal corporate income tax rate of 22%.
Groups of companies. Joint taxation of Danish affiliated companies, Danish permanent establishments of foreign affiliated companies and real properties of foreign affiliated companies that are located in Denmark is compulsory. The jointly taxed income equals the sum of the net income of the jointly taxed companies, permanent establishments and real properties. An affiliation generally exists if a common shareholder (Danish or foreign) is able to control the company (for example, by holding more than 50% of the voting rights).
Joint taxation with foreign companies is voluntary. If a Danish company elects to be jointly taxed with a foreign company, all foreign affiliated companies must be included in the Danish joint taxation arrangement. These include all subsidiaries, permanent establishments and real estate owned by the Danish company. If the Danish company is owned by a foreign group, the ultimate foreign parent company and all foreign companies affiliated with the ultimate foreign parent company are also included.
A company is considered to be an affiliated company if a controlling interest exists.
A 10-year period of commitment applies if a Danish company elects to be jointly taxed with its foreign affiliated companies.
Deduction of final losses in foreign subsidiaries. Regardless of having chosen not to apply an international joint taxation scheme, a Danish parent company can deduct losses in foreign subsidiaries, permanent establishments or real estate if all of the following conditions are fulfilled:
• The parent company has not chosen international joint taxation.
• The subsidiary or the permanent establishment is resident in the EU/EEA, in the Faroe Islands or in Greenland (this condition does not apply to real estate).
• The subsidiary is directly owned by the parent company, or indirectly owned by intermediary companies, that are all resident in the same country as the subsidiary.
• The losses are final.
• A loss in a subsidiary would have been deductible if international joint taxation had been chosen.
• A loss in a permanent establishment or real estate is deductible according to the general rules of the tax code.
• The determination of the loss is conducted in accordance with Danish rules.
The possibility has been introduced with effect from the 2019 income year, and tax guidance has been issued by the tax authorities concerning the possibility of reopening of the tax returns for the 2009-2018 income years and correcting them in accordance with the new rules.
D. Other significant taxes
The following table summarizes other significant taxes.
Labor market supplementary pension scheme (ATP); approximate annual employer contribution for each full-time employee
Nature of tax Rate
Payroll tax (Loensumsafgift)
Banks, insurance companies and other financial businesses; levied on total payroll
Other VAT-exempt businesses, including some public bodies; levied on total payroll plus taxable profits, adjusted to exclude financial income and expenses
Lotteries and information activities performed by tourist offices, other organizations and some public bodies; levied on total payroll
Publishers or importers of newspapers; levied on the value of newspapers sold
E. Miscellaneous matters
Foreign-exchange controls. Denmark does not impose foreignexchange controls.
Debt-to-equity rules. Under thin-capitalization rules, interest paid by a Danish company or branch to a foreign group company is not deductible to the extent that the Danish company’s debt-to-equity ratio exceeds 4:1 at the end of the debtor’s income year and that the amount of controlled debt exceeds DKK10 million. Limited deductibility applies only to interest expenses relating to the part of the controlled debt that needs to be converted to equity to satisfy the debt-to-equity ratio of 4:1 (that is, a minimum of 20% equity). The thin-capitalization rules also apply to third-party debt if the third party has received guarantees and similar assistance from a group company of the borrower.
The Danish thin-capitalization rules are supplemented through an “interest ceiling rule” and an Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) rule. These rules apply to controlled and non-controlled debt. Only companies with net financial expenses exceeding DKK21,300,000 and DKK22,313,400, respectively (2024 amounts), are subject to these supplementary rules. For jointly taxed companies, the thresholds apply to all of these companies together.
Under the “interest ceiling rule,” a company may only deduct net financial expenses corresponding to 6% (2024 rate) of the taxable value of certain qualified assets. Deductions for any excess net financial expenses are lost, except for capital losses, which may be carried forward for three years.
Under the EBITDA rule, a company may reduce its taxable income through the deduction of financial expenses by no more than 30%. Net financial expenses exceeding this limit are nondeductible but, in contrast to the interest ceiling rule, the excess expenses can be carried forward without any time limitation (if not restricted again by the EBITDA rule). The calculation must be made after taking into account a possible restriction under the interest ceiling rule.
Under the interest ceiling rule, a safe harbor of net financial expenses up to DKK21,300,000 (2024 amount) exists. Under the EBITDA rule, a safe harbor of net financial expenses up to DKK22,313,400 (2024 amount) exists. These expenses are always
the company is regarded as residing in Denmark under a double tax treaty, to the extent that the other jurisdiction denies the deduction of the payments, expenses and losses. Also, a jointly taxed company that is participating in a joint taxation or another form of tax-loss carryforward in another jurisdiction is not allowed to deduct payments, expenses or losses, to the extent that the other jurisdiction allows for such items to be set off against income that is not double included income. Payments, expenses and loses that are deductible in both jurisdictions and for which deduction is not denied under the provision described in the preceding sentence can only be deducted from double included income.
Transfer pricing. Transactions between affiliated entities must be determined on an arm’s-length basis. In addition, Danish companies and Danish permanent establishments must report summary information about transactions with affiliated companies as part of the company’s annual tax return.
Danish tax law requires entities to prepare and maintain written transfer-pricing documentation for transactions that are not considered insignificant. Enterprises can be fined if they have not prepared any transfer-pricing documentation or if the documentation prepared is considered to be insufficient as a result of gross negligence or deliberate omission. The documentation can be prepared in Danish, English, Norwegian or Swedish and must be prepared no later than the deadline to file the summary information about transactions with affiliated companies, which is an integrated part of the company’s annual tax return. The transferpricing documentation must be submitted to the tax authorities within 60 days on request.
From 2021 and onward, it is mandatory for companies to which the documentation obligation applies to submit its transferpricing documentation within 60 days after the deadline for submitting its tax returns. If a company does not comply with this requirement, it is risking considerable fines and discretionary changes to its taxable income.
The fine for failure to prepare satisfactory transfer-pricing documentation consists of a basic amount of DKK250,000 per year per entity for up to five years plus 10% of the income increase required by the tax authorities. The basic amount may be reduced to DKK125,000 if adequate transfer-pricing documentation is filed subsequently.
Fines may be imposed for every single income year for which satisfactory transfer-pricing documentation is not filed.
In addition, companies may be fined if they disclose incorrect or misleading information for purposes of the tax authorities’ assessment of whether the company is subject to the documentation duty.
The documentation requirements for small and medium-sized enterprises apply only to transactions with affiliated entities in non-treaty countries that are not members of the EU/EEA. To qualify as small and medium-sized enterprises, enterprises must satisfy the following conditions:
• They must have less than 250 employees.
• They must have an annual balance sheet total of less than DKK125 million or annual revenues of less than DKK250 million.
The above amounts are calculated on a consolidated basis (that is, all group companies must be taken into account).
Transactions between Danish affiliated entities are exempt from the documentation requirement unless one involved entity is subject to a special tax regime in Denmark.
Country-by-Country reporting. Entities belonging to a multinational group with a consolidated revenue above DKK5.6 billion (EUR750 million) are subject to Country-by-Country (CbC) Reporting and notification obligations. Denmark generally follows the Organisation for Economic Co-operation and Development (OECD) guidelines on CbC reporting.
The notification must be submitted by the Danish company or permanent establishment no later than 12 months after the last day of the reporting period (the entity’s income year) to which the report relates. If there is more than one Danish entity in the group and these entities are subject to joint taxation in Denmark, the notification can be made by the appointed administrative entity of the Danish joint taxation group on behalf of all entities.
A surrogate or local filing of the CbC Report is required if there is no active agreement on automatic exchange of the report between Denmark and the country where the ultimate parent entity or another surrogate parent entity filing the report is tax resident.
Minimum taxation. Effective for income years starting on or after 1 January 2024, Denmark has introduced minimum taxation rules in line with the OECD Pillar Two guidelines and the EU-directive on minimum tax.
F. Treaty withholding tax rates
Under Danish domestic law, no withholding tax is imposed on dividends paid to companies if both of the following requirements are satisfied:
• The shares are group shares or subsidiary shares (see Section B).
• A tax treaty between Denmark and the jurisdiction of residence of the recipient of the dividend provides that Denmark must eliminate or reduce the withholding tax on dividends, or the recipient is resident in an EU Member State and falls within the definition of a company under Article 2 of the EU ParentSubsidiary Directive (90/435/EEC) and the directive provides that Denmark must eliminate or reduce the withholding tax on dividends.
As a result, the reduced treaty rates on dividends in the table below might be eliminated under Danish domestic law.
(j) The rate is 15% if the recipient is not a company owning at least 20% of the capital of the payer and has invested at least EUR1 million in the capital of the payer.
(k) The rate is 5% if the recipient is a company that owns at least 70% of the capital of the payer or has invested at least USD12 million in the capital of the payer. The rate is 10% if the recipient is a company owning at least 25%, but less than 70%, of the capital of the payer. For other dividends, the rate is 15%.
(l) The rate is 10% if the recipient is not a company owning at least 25% of the capital of the payer.
(m) The treaty does not cover Hong Kong.
(n) The withholding tax rate for dividends is 0% if the recipient owns at least 10% of the share capital in the payer of the dividends for a continuous period of at least 12 months. If this condition is not met, the dividend withholding tax rate is 15%.
(o) The rate is 20% if the recipient is not a company owning at least 25% of the capital of the payer.
(p) The rate is 25% if the recipient is not a company owning at least 25% of the capital of the payer.
(q) The rate is 30% if the recipient is not a company owning at least 25% of the voting power during the period of six months immediately preceding the date of payment.
(r) The withholding tax rate for dividends is 0% if the recipient owns at least 10% of the share capital in the payer of the dividends for a continuous period of at least 12 months. If this condition is not met, the dividend withholding tax rate is 10%.
(s) The rate is 5% if the recipient of the dividends is a company owning at least 25% of the capital of the payer.
(t) The withholding tax rate for dividends is 0% if the recipient owns at least 10% of the share capital in the payer of the dividends for a continuous period of at least six months. If this condition is not met, the dividend withholding tax rate is 15%.
(u) The rate applies if the recipient owns at least 25% of the share capital in the payer of the dividends for a continuous period of at least 12 months. If this condition is not met, the rate is 15%.
(v) The rate applies if the recipient owns at least 25% of the share capital in the payer of the dividends for a continuous period of at least 12 months. If this condition is not met, the rate is 10%.
(w) The rate is 15% if the recipient is not a company owning at least 25% of the voting power of the payer.
(x) The rate is 20% if the recipient is not a company owning at least 25% of the voting power of the payer.
(y) The rate is 15% if the recipient is not a company owning at least 10% of the shares of the payer. The 0% and 5% rates depend on applicable limitation-ofbenefit tests.
(z) The rate is 10% if the interest arising in a contracting state is determined by reference to receipts, sales, income, profits or other cash flow of the debtor or a related person; to any change in the value of any property of the debtor or a related person; to any dividend, partnership distribution or similar payment made by the debtor or a related person; or to any other interest similar to such interest arising in a contracting state, and if the beneficial owner of the interest is a resident of the other contracting state.
In addition to the double tax treaties listed in the table above, Denmark has entered into double tax treaties on savings, double tax treaties on international air and sea traffic, agreements on exchange of information in tax cases and agreements on promoting the economic relationship. The following are the jurisdictions with which Denmark has entered into such agreements:
• Double tax treaties on savings: Anguilla; Aruba; British Virgin Islands; Cayman Islands; Curaçao; Sint Maarten; Bonaire, Sint Eustatius and Saba (formerly part of the Netherlands Antilles); Guernsey; Isle of Man; Jersey; Montserrat; and Turks and Caicos Islands
• Double tax treaties on international air and sea traffic: Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Hong Kong, Isle of Man, Jersey, Jordan, Kuwait and Lebanon
• Agreements on exchange of information: Andorra; Anguilla; Antigua and Barbuda; Aruba; Bahamas; Barbados; Belize;
Bermuda; Botswana; Brunei Darussalam; Cayman Islands; Cook Islands; Costa Rica; Curaçao; Sint Maarten; Bonaire, Sint Eustatius and Saba (formerly part of the Netherlands Antilles); Czech Republic; Dominica; Gibraltar; Grenada; Guernsey; Isle of Man; Jamaica; Jersey; Liberia; Liechtenstein; Macau; Marshall Islands; Mauritius; Monaco; Montserrat; Netherlands; Niue; Panama; Qatar; St. Kitts and Nevis; St. Lucia; St. Vincent and the Grenadines; Samoa; San Marino; Seychelles; Turks and Caicos Islands; United Arab Emirates; Uruguay and Vanuatu
• Agreements on promoting the economic relationship: Aruba; Curaçao; Sint Maarten; and Bonaire, Sint Eustatius and Saba (formerly part of the Netherlands Antilles)
Agreements on exchange of information with respect to taxes have been proposed with Belgium, Greenland, Guatemala and Kuwait.