Corporate tax in Denmark

Summary

Corporate Income Tax Rate (%) 22
Capital Gains Tax Rate (%) 22
Branch Tax Rate (%) 22
Withholding Tax (%)
Dividends 27 (a)
Interest 22 (b)
Royalties from Patents, Know-how, etc. 22 (c)
Branch Remittance Tax 0 (d)
Net Operating Losses (years)
Carryback 0
Carryforward Unlimited

a) See Section B.

b) The 22% rate applies to payments on or after 1 March 2015. See Section B.

c) The 22% rate applies to payments on or after 1 March 2015. 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 European Union (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 recharacterized 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.

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 it is managed and controlled 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 estab­lishments and real estate located in Denmark (for details, see Section C).

The income of resident companies that is generated in a foreign permanent establishment or real estate located outside Denmark is not included in the statement of the taxable income in Denmark, unless Denmark is granted the right to tax such income under an applicable double tax treaty or other international agreement, or the income is subject to controlled foreign company (CFC) taxa­tion (see Section E).

Branches of foreign companies located in Denmark are taxed only on trading income and on chargeable capital gains derived from the disposal of trading assets that are located in Denmark and related to a Danish permanent establishment.

Rate of corporate tax. For the 2016 income year, resident and non­resident companies are taxed at a rate of 22%.

Capital gains. Capital gains are taxed as other income at a rate of 22%.

Capital gains derived from a disposal of shares in a group com­pany (group shares), shares in a subsidiary (subsidiary shares) and own shares (shares issued by the company) are exempt from tax regardless of the ownership period, while losses incurred on such shares are not deductible.

The following are considered group shares:

  • Shares in a company that is subject to mandatory joint taxation under Danish rules together with the shareholder of the company
  • Shares in a company that is eligible for inclusion in an inter­national joint taxation arrangement under Danish rules (see Section C)

Subsidiary shares are shares in a company in which the share­holder directly owns at least 10% of the share capital. Capital gains on subsidiary shares in companies resident in Denmark are ex­empt from tax. In addition, capital gains on subsidiary shares in companies resident in foreign countries can be exempt from tax if withholding tax on dividends distributed from the company may be reduced or eliminated under the EU Parent-Subsidiary Direc­tive or a double tax treaty.

Certain anti-avoidance rules apply if shareholders that do not each meet the requirements of holding group shares or subsidiary shares set up an intermediate holding company that by itself is able to meet the requirements.

In certain cases, capital gains may be reclassified as dividends. The reclassification of capital gains to dividends applies under specific circumstances only.

In general, capital gains derived from a disposal of shares that are not own shares, group shares or subsidiary shares (known as port­folio shares) are taxable at the statutory corporate income tax rate of 22%, while losses are deductible, regardless of the ownership period. However, capital gains derived from the disposal of port­folio shares do not trigger taxation if all of the following condi­tions are satisfied:

  • The shares relate to a Danish limited liability company or a similar foreign company.
  • The shares are not publicly listed.
  • A maximum of 85% of the book value of the portfolio company is placed in publicly listed shares.
  • The company disposing of the portfolio shares does not buy new portfolio shares in the same company within six months after the disposal.

The current rules regarding taxation of portfolio shares are based on the mark-to-market method, under which gains and losses are computed on the basis of the market value of the shares at the beginning and end of the income year. It is possible to opt for taxation based on the realization method with respect to unlisted portfolio shares only. Listed portfolio shares must be taxed ac­cording to the mark-to-market method. Special rules apply to the carryforward of unused losses on portfolio shares.

Gains on the sale of goodwill and intellectual property rights are subject to tax.

Recaptured depreciation (see Section C) is taxed as ordinary in come at a rate of 22%.

Administration. In general, the income year for companies is the calendar year. Companies may select a staggered income year, which is an income year other than the calendar year. They may change their income year if justified by special circumstances.

In general, tax returns for companies must be filed within six months after the end of the companies’ income year. For compa­nies with income years ending from 1 February to 31 March, tax returns must be filed by 1 September. Companies pay corporate tax on a current-year basis at a rate of 22%, with half payable on 20 March and the remainder on 20 November.

Dividends paid. In general, dividends paid are subject to withhold­ing tax at a rate of 27%. However, withholding tax is not imposed on dividends paid to companies if the Danish shares qualify as subsidiary shares (see Capital gains) and if the withholding tax must be reduced or eliminated under the EU Parent-Subsidiary Directive or a double tax treaty. For a company owning Danish shares that are group shares rather than subsidiary shares, it is required that the withholding tax would have been reduced or eliminated under the EU 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.

Interest paid. In general, interest paid to foreign group companies is subject to withholding tax at a rate of 22% for payments on or after 1 March 2015. The withholding tax is eliminated if any of the following requirements are satisfied:

  • The interest is not subject to tax or taxed 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 both 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/EEC).

— The companies have been associated (as stated in the direc­tive) for at least a 12-month period.

  • 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 may be subject to CFC taxation.
  • The recipient company can prove that the foreign taxation of the interest income amounts to at least 3/4 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 3/4 of the Danish corporate income tax.

In addition to the above requirements, the recipient of the interest must be the beneficial owner of the interest and, accordingly, is entitled to benefits under the EU Interest-Royalty Directive or a double tax treaty.

The above measures and exceptions also apply to non-interest-bearing loans that must be repaid with a premium by the Danish debtor company.

Determination of trading income

General. Taxable income is based on profits reported in the an­nual accounts, which are prepared in accordance with generally ac cepted 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 de duct-ible 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.

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 from group shares or subsidiary shares are exempt from tax if the dividend withholding tax must be reduced or eliminated under the EU Parent-Subsidiary Direc­tive or a double tax treaty (see Capital gains in Section B for the definitions of group shares and subsidiary shares). Dividends for which the dividend paying company has claimed a tax deduction from its taxable income is not exempt from tax for the Danish dividend receiving company, unless taxation in the source coun­try is reduced or eliminated under the EU Parent-Subsidiary Directive.

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.

Dividends that are not covered by the above tax exemption, such as dividends from 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%. A tax credit is normally available to the dividend receiving company for foreign withhold­ing taxes withheld by the dividend distributing company.

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 more-than-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 will apply if the Dan­ish company has received dividends from abroad through one or more other Danish companies. Such dividends will generally be subject to withholding tax at a rate of 27%, unless the rate is reduced under a double tax treaty with Denmark or the recipient is covered by the EU Parent-Subsidiary Directive.

Depreciation

Immediate deductions. For the 2015 income year, new acquisi­tions not exceeding DKK12,800 (2015 amount) or with useful lives not exceeding three years are 100% deductible in the year of purchase. Computer software, operating equipment and ships for research and development, except operating equipment and ships used for exploration of raw materials, are also 100% deductible in the year of purchase.

Asset classes. Certain depreciable assets must be allocated among four asset classes:

  • Operating equipment (including production facilities, machin­ery, office equipment, hardware and certain software that may not be written off immediately) may be depreciated at an annual rate of up to 25%, using the declining-balance method.
  • Certain ships (weighing more than 20 tons and leased out with­out a crew) may be depreciated at an annual rate up to 12%, using the declining-balance method.
  • Certain operating equipment with a long economic life (certain ships transporting goods or passengers, aircraft, rolling railway material, drilling rigs and facilities for producing heat and elec­tricity) may be depreciated at an annual rate of up to 17%, using the declining-balance method. This rate will be decreased by two percentage points every other year until the rate is re duced to 15% in 2016. Facilities for producing heat and electricity with a capacity of less than 1 MW and wind-turbine generators (regardless of the capacity) may be depreciated at an annual rate of up to 25%, using the declining-balance method.
  • Infrastructural facilities (facilities used for purposes, such as transporting, storing and distributing electricity, water, heat, oil, gas and wastewater and facilities with respect to radio, telecom­munications and data transmissions) may be depreciated at an annual rate of up to 7%, using the declining-balance method.

It is important to distinguish between building installations and infrastructural facilities.

Buildings. Buildings used for commercial and industrial purposes may be depreciated at an annual rate of up to 4%, using the straight-line method based on the purchase price, excluding the value of the land. Office buildings, financial institutions, hotels, hospitals and certain other buildings may not be depreciated. How ever, office blocks or office premises adjacent to buildings used for commercial purposes may be depreciated if the office blocks are used together with the depreciable buildings.

Others. Acquired goodwill, patent rights and trademarks may be amortized over seven years. Costs incurred in connection with the improvement of rented premises and properties (not used for habitation or other commercial or non-industrial purposes) on leas ed land may be depreciated at an annual rate of up to 20%. If the tenancy is entered into for a fixed number of years, the annual depreciation rate cannot exceed a rate that results in equal amounts of depreciation over the fixed number of years.

Recapture. The amount of depreciation claimed on an asset may be recaptured on the disposal of the asset. Recaptured depreciation is subject to tax at a rate of 23.5%. For assets depreciated under the declining-balance method, however, the consideration received is deducted from the collective declining-balance account, and, consequently, the recapture is indirect.

Advance depreciation. Advance depreciation is available on ships. A total of 30% (with a maximum of 15% in any single year) of the expenditure exceeding DKK1,453,200 (2015 amount) may be written off in the years preceding the year of delivery or comple­tion. The relief is given if a binding contract has been con cluded for construction or purchase of a ship. If a partnership enters into the contract, each partner must meet the DKK1,453,200 (2015 amount) requirement. If a ship is intended for lease, advance depreciation is not allowed in the year of acquisition, unless per­mission is obtained from the local tax authorities. This rule does not apply to the ships included in the new asset classes (see Depreciation).

Relief for trading losses. Trading losses and interest expenses may be set off against other income and chargeable gains for income years beginning on or after 1 July 2012. Losses incurred may be set off in full against the portion of the year’s taxable income not exceeding an amount of DKK7,747,500 (2015 amount). Losses exceeding DKK7,747,500 (2015 amount) may be set off against 60% of the taxable income for the year. As a result, a company may not reduce its taxa ble income to less than 40% of the taxable income exceeding DKK7,747,500 (2015 amount).

Losses, including prior-year losses, that cannot be set off against the taxable income for the year may be carried forward infinitely.

Losses may not be offset against interest and other capital income, net of interest paid, if more than 50% of the shares in the com­pany changed ownership since the beginning of the year in which the loss was incurred. In addition, tax losses are forfeited by com­panies that are not engaged in an activity at the date of change of ownership.

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 the shareholder 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 are 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.

Other significant taxes

The following table summarizes other significant taxes.

 

Nature of tax Rate
Value-added tax 25.00%
Labor market supplementary pension
scheme (ATP); approximate annual
employer contribution for each
Full-time employee
DKK2,160
Payroll tax (Loensumsafgift)
Banks, insurance companies and other
Financial businesses; levied on total payroll
12.20%
Other VAT-exempt businesses, including
some public bodies; levied on total payroll
plus taxable profits, adjusted to exclude
financial income and expenses
4.12%
Lotteries and information activities performed
By tourist offices, other organizations and
some public bodies; levied on total payroll
6.37%
Publishers or importers of newspapers; levied
On the value of newspapers sold
3.54%

Miscellaneous matters

Foreign-exchange controls. Denmark does not impose foreign-exchange 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 (2015 amount). 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 and Tax (EBIT) rule. These rules apply to both controlled and non-controlled debt. Only companies with net financial expenses ex­ceeding DKK21,300,000 (2015 amount) are subject to these sup-plementaryrules. Forjointlytaxed companies, the DKK21,300,000 thresh old applies to all of these companies together.

Under the “interest ceiling rule,” a company may only deduct net financial expenses corresponding to 4.1% (2015 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 EBIT rule, a company may reduce its taxable income through the deduction of financial expenses by no more than 80%. Net financial expenses exceeding this limit are nondeductible but, in contrast to the interest ceiling rule, the excess expenses can be carried forward to be used in future years (if not restricted again by the EBIT rule). The calculation must be made after taking into account a possible restriction under the interest ceiling rule.

If a company establishes that it could obtain third-party financing on similar terms, it may be allowed to deduct the interest that would normally be disallowed under the ordinary thin-capitalization rules described above. No arm’s-length principle can be applied to help the company escape the interest ceiling rule or the EBIT rule.

Danish tax law does not recharacterize the disallowed interest or impose withholding tax on it.

Anti-avoidance legislation. A general anti-avoidance rule has been implemented in the Danish domestic tax law. It is contained in the new Article 3 of the Danish Tax Assessment Act.

The anti-avoidance rule seeks to restrict the benefits of certain EU Directives (EU Parent/Subsidiary Directive [2011/96/EEC], the Interest/Royalty Directive [2003/49/EEC] and the EU Merger Tax Directive [2009/133/EEC]) or a double tax treaty claimed by a taxpayer that participates in an arrangement, or a series of arrangements, that has the primary purpose (or has as one of its primary purposes) to achieve a tax benefit that is contrary to the contents or purpose of the EU Directive or double tax treaty in question.

In addition, certain recharacterization rules exist, such as a rule that recharacterizes debt as equity if the debt is treated as an equity instrument according to the tax rules in the country of the creditor.

Although a Danish company or taxable legal entity may change its domicile to another country, this would normally be consid­ered a liquidation with the same tax effect as a taxable sale. The company can transfer its activities abroad, but, to prevent tax avoidance, such a transfer is considered a taxable disposal of the activities.

Controlled foreign companies. Under the CFC legislation, a Dan­ish company, together with other group member companies, hold­ing more than 50% of the voting power of a foreign company must include in taxable income 100% of the taxable income of the subsidiary if the subsidiary is primarily engaged in financial activities. For this purpose, a subsidiary is considered to be pri­marily engaged in financial activities if more than 50% of the subsidiary’s taxable income consists of net financial income and if more than 10% of the subsidiary’s assets are “financial assets” (calculated according to modified Danish tax rules). The CFC rules apply to branches only if the branch is directly held by the Danish company. The income of in directly held branches is in­cluded in the income of its head office.

Transparency rule. Under the transparency rule (Danish anti-Check-the-Box rule), if a Danish company is considered to be transparent under foreign tax rules (for example, the company is taxed as a branch in a foreign country), in principle, the company is also considered to be transparent under Danish tax rules. The rule may imply that a Danish company owned by a US parent company that has “checked the box” on the Danish company can­not deduct interest expenses, royalty expenses or other internal expenses paid to the US parent company. Certain exceptions exist, and case-by-case evaluation is recommended.

Transfer pricing. Transactions between affiliated entities must be de termined on an arm’s-length basis. In addition, Danish compa­nies and Danish permanent establishments must report summary information about transactions with affiliated companies.

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 submitted to the tax authorities within 60 days on request. For a particular income year, such request may be made after the com­pany has filed its tax return for the income year.

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).

Dividends (a) Interest (b) Royalties (e)
Argentina 10 (c) 0 3/5/10/15
Australia 15 0 10
Austria 0 (o) 0 0
Bangladesh 10 (l) 0 10
Belarus 10 0 0
Belgium 15 0 0
Brazil 25 0 15 (g)
Bulgaria 5 (c) 0 0
Canada 5 (c) 0 10
Chile 5 (c) 0 05/15/17
China (m) 10 0 10
Croatia 5 (c) 0 10
Cyprus 0 (c) 0 0
Czechoslovakia (i) 15 0 0/5
Czech Republic 0 (n) 0 10
Egypt 15 (c) 0 20
Estonia 5 (c) 0 05/10/17
Faroe Islands 0 (l) 0 0
Finland 0 (l) 0 0
France (p) 27 0 22
Georgia 0/5/10 (f) 0 0
Germany 5 (l) 0 0
Greece 18 0 5
Greenland 0 (d) 0 10
Hungary 0 (n) 0 0
Iceland 0 (l) 0 0
India 15 (c) 0 20
Indonesia 10 (c) 0 15
Ireland 0 (c) 0 0
Israel 0 (r) 0 0
Italy 0 (c) 0 0/5
Jamaica 10 (c) 0 10
Japan 10 (c) 0 10
Kenya 20 (c) 0 20
Korea (South) 15 0 10/15/17
Kuwait 0 (c) 0 10
Latvia 5 (c) 0 05/10/17
Lithuania 5 (c) 0 05/10/17
Luxembourg 5 (c) 0 0
Macedonia 0/5 (c) 0 10
Malaysia 0 0 10
Malta 0 (c) 0 0
Mexico 0 (c) 0 10
Morocco 10 (c) 0 10
Netherlands 0 (l) 0 0
New Zealand 15 0 10
Norway 0 (l) 0 0
Pakistan 15 0 12
Philippines 10 (c) 0 15
Poland 0 (c) 0 5
Portugal 10 (c) 0 10

 

 

Dividends (a) Interest (b) Royalties (e)
% % %
Romania 10 (c) 0 10
Russian Federation 10 0 0
Serbia 5 (c) 0 10
Singapore 0 (c) 0 10
Slovenia 5 (c) 0 5
South Africa 5 (c) 0 0
Spain (q) 27 0 22
Sri Lanka 15 0 10
Sweden 0 (l) 0 0
Switzerland 0 (n) 0 0
Taiwan 10 0 10
Tanzania 15 0 20
Thailand 10 0 5/15
Trinidad and Tobago 10 (c) 0 15
Tunisia 15 0 15
Turkey 15 (c) 0 10
Uganda 10 (c) 0 10
Ukraine 5 (c) 0 10
USSR (h) 15 0 0
United Kingdom 0 (c) 0 0
United States 0/15 (l) 0 0
Venezuela 5 (c) 0 5/10
Vietnam 5 (k) 0 5/15
Yugoslavia (j) 5 (c) 0 10
Zambia 15 0 15
Non-treaty countries 27 22 (s) 22 (s)

(a)   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 country 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 Parent-Subsidiary Directive (90/435/EEC) and the directive provides that Denmark must eliminate or reduce the withholding tax on dividends.

b) In general, all interest payments to foreign group companies are subject to a final withholding tax of 22% for payments on or after 1 March 2015. Several exceptions exist (see Section B). As a result of these exceptions, in general, withholding tax is im posed only on interest payments made to group compa­nies that would qualify as CFCs for Danish tax purposes or if the recipient is not considered to be the beneficial owner, according to the domestic interpre­tation. Effective from the 2006 income year, withholding tax on interest paid to individuals was abolished.

c) The rate is 15% (Croatia, 10%; Portugal and Singapore, 10%; Egypt, Indone­sia, Trinidad and Tobago, and Turkey, 20%; India and Morocco, 25%; Kenya, 30%) if the recipient is not a company owning at least 25% of the capital (Cyprus, 10% of the capital; Japan and Trinidad and Tobago, 25% of the vot­ing shares).

d) The withholding tax rate is 0% if all of the following conditions are satisfied:

  • The recipient directly owns at least 25% of the share capital of the payer for a period of 12 consecutive months that includes the date of the distribution of the dividend.
  • The dividend is not taxed in Greenland.
  • The recipient does not deduct the portion of a dividend distributed by it that is attributable to the Danish subsidiary.

If the above conditions are not met, the withholding tax rate is 27%.

(e)   Under Danish domestic law, the rate is 0% for royalties paid for the use of, or the right to use, 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. Under a tax treaty, the general withholding tax rate for royalties of 22% (applicable to payments on or after 1 March 2015) can be reduced to 0%. Royalties paid to a company resident in another EU country are not subject to withholding tax if the provisions of the EU Interest/Royalty Direc tive are met and if the recipient is considered to be the beneficial owner according to the domestic interpretation.

f) The withholding tax rate is 0% if the recipient owns at least 50% of the share capital in the dividend distributing company and has invested more than EUR2 million in the dividend paying company. The withholding tax rate is 5% if the recipient owns at least 10% of the share capital in the dividend pay­ing company and has invested more than EUR100,000 in the dividend paying company. The withholding tax rate is 10% in all other cases.

g) The rate is 22% (applicable to payments on or after 1 March 2015) for pay­ments for the use of, or the right to use, trademarks.

h) Denmark honors the USSR treaty with respect to the former USSR republics. Azerbaijan, Moldova, Tajikistan and Uzbekistan have declared that they do not consider themselves obligated by the USSR treaty. Armenia and Kyrgyz-stan have not yet declared whether they consider themselves obligated by the USSR treaty. Denmark has entered into tax treaties with Belarus, Estonia, Georgia, Latvia, Lithuania and Ukraine.

i) Denmark honors the Czechoslovakia treaty with respect to the Slovak Republic.

j) Denmark honors the Yugoslavia treaty with respect to Montenegro and Serbia. Denmark has entered into tax treaties with Croatia, Macedonia, Serbia and Slovenia. The withholding rates under these treaties are listed in the table.

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 15% if the recipient is not a company owning at least 10% of the shares of the payer.

m) The treaty does not cover the Hong Kong SAR.

n) The withholding tax rate for dividends is 0% if the parent company (benefi­cial owner) owns at least 10% of the share capital of the payer of the dividends (under the Hungary treaty, the share capital must also be owned for a continu­ous period of at least one year and/or the parent company [beneficial owner] must be a pension fund). If this condition is not met, the dividend withholding tax rate is 15%.

o) Under a new tax treaty between Denmark and Austria, the dividend withhold­ing tax rate is 0% if the recipient is a company owning at least 10% of the payer. For other dividends, the rate is 15%. These rates will apply for income years beginning on or after 1 January 2011.

p) The double tax treaty between Denmark and France was terminated, effective from 1 January 2009. The countries will enter into a new treaty. However, at the time of writing, the countries had not yet entered into such treaty. Until a new tax treaty enters into force, Danish withholding taxes on dividends, inter­est and royalties are imposed according to Danish domestic law. Certain exemptions may apply (see Section B).

q) The double tax treaty between Denmark and Spain was terminated, effective from 1 January 2009. The countries will enter into a new treaty. However, at the time of writing, the countries had not yet entered into such treaty. Until a new tax treaty enters into force, Danish withholding taxes on dividends, inter­est and royalties are imposed according to Danish domestic law. Certain exemptions may apply (see Section B).

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) This rate applies to payments on or after 1 March 2015.

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 SAR, Isle of Man, Jersey, Jordan, Kuwait and Lebanon
  • Agreements on exchange of information: Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Brunei Darussalam, Cayman Islands, Dominica, Gibraltar, Gre­nada, Guatemala, Guernsey, Ireland, Isle of Man, Jersey, liechten stein, Luxembourg, Macau SAR, Monaco, Montserrat, St. Kitts and Nevis, St. Vincent and the Grenadines, San Marino, Turks and Caicos Islands, Uruguay, and Curaçao, Sint Maarten, Bonaire, Sint Eustatius and Saba (formerly part of the Netherlands Antilles)
  • Agreements on promoting the economic relationship: Aruba, and Curaçao, Sint Maarten, 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, Botswana, Costa Rica, Green­land (appendix), Guatemala, Jamaica, Kuwait, Liberia, Marshall Islands, Niue, Panama, Qatar, Seychelles, Uruguay and Vanuatu.