This content is from: Local Insights

Denmark

New tax regime for holding companies

Denmark has now become one of the most attractive locations for holding companies in the world.

As from 1 January 1999 Denmark offers:

No tax on in- and outbound dividends.

No withholding tax on dividends, distributed from a Danish holding company to a foreign parent company. The foreign parent company must own at least 25% of the shares in the holding company for a continuous period of one year, during which the dividends may be paid.

No tax on dividends received by a Danish holding company from a foreign subsidiary. The holding company must hold at least 25% of the shares in the foreign company for a continuous period of a minimum of one year during which the dividends may be paid.

A treaty network of approximately 75 treaties of which many reduce withholding tax to zero on dividends distributed to a Danish holding company.

No Subject to Tax Limitations
The new rules contain no restrictions on the jurisdictions of the foreign parent or subsidiary. Accordingly, tax-efficient holding structures can be established even including zero tax companies as parent or subsidiary. Limitations only apply to financial income. Some treaties or foreign legislation might contain anti-avoidance provisions. Financial income
Accordingly, CFC (Control Foreign Company) provisions apply if: -

the Danish holding company holds more than 25% of the share capital or more than 50% of the voting rights in the foreign subsidiary; and

the foreign subsidiary conducts mainly financial business ie more than one third of its income derives from financial activities; or

The income of the foreign subsidiary is taxed significantly lower than the income of a Danish company would be.

In such a case the income of the foreign subsidiary will be taxed with the Danish holding company at the general corporate tax rate (32% in 1999).

Ulrik Fleicher-Michaelsen

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