Denmark: New anti-abuse rules aim to protect dividend WHT

Arne Riis, Bech-Bruun, Copenhagen

On October 3, 2012, the Danish Tax Ministry introduced a new anti-abuse bill with the purpose of once again tightening the Danish tax legislation. The rules were passed with only few amendments to the original bill and enacted on December 14, 2012.

More specifically, the new anti-abuse rules aim to ensure that:

• the Danish rules concerning dividend withholding tax (WHT) cannot be circumvented by structures whereby taxable dividend distributions are converted into tax exempt debt payments (“Closing Dividend Withholding Tax Loophole”),

• foreign companies do not use Danish conduit entities to reduce other countries dividend withholding tax (“Abolition of Denmark as a Holding Jurisdiction”),

• all companies and organisations are subject to full Danish taxation if they are either registered in Denmark or have their effective seat of management in Denmark (“Danish Tax Jurisdiction of All Entities registered in the Danish Business Authority”)

The new rules took effect as of January 1, 2013. To prevent tax speculation, the rules concerning the Dividend Withholding Tax Loophole will, however, be effective as of the date the bill was published, i.e. on October 3, 2012….

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