- Professional News
- 08 November 2011
Tax initiatives directed at multinationals
On 29 October, the recently appointed Danish Minister of Taxation in a press release announced plans aimed at multinational corporations and other corporations who are present in Denmark, but pay no or very little Danish tax.
The plans include a number of restrictions with regard to transfer pricing documentation requirements and limitations to the deductibility of interest and carry forward of losses as well as an increase in the efforts of the tax authorities in the tax assessment of multinational corporations.
The announced restrictions have not yet been presented in the form of a bill, but will presumably be introduced to Parliament during the spring of 2012.
The announced plans are to be carried out in three steps
Firstly, an increase in the efforts concerning tax assessment of multinationals and increased public transparency in relation to tax payments by Danish companies (a form of "name and shame") is to be implemented during 2012. The government's 2012 budget proposal published on 3 November includes added funds for the tax authorities to be used in the increased tax assessment efforts.
Secondly, a set of restrictions directed at companies conducting cross-border activities is to be implemented. The restrictions include:
(i) A requirement for a special auditor´s certificate if the company has had tax losses for a number of years, stating that no evidence has been found to indicate that the company does not comply with the arm´s length principle if the corporation carries out transactions with non-EU/EEC/tax treaty nations.
(ii) A minimum fine for non-compliance with the requirements for providing transfer pricing documentation of DKK 250,000 (app. EUR 33,600).
(iii) Amendments to the right to be credited for taxes paid by Danish companies on royalties abroad.
Finally, the initiative includes three elements aimed at businesses in Denmark in general:
(i) The right to carry forward losses indefinitely will be restricted. It is proposed to establish a system modelled over the German and French systems for carry forward, prolonging the period over which losses may be deducted.
(ii) The current restricted right to deduct interest expenses will be further restricted.
(iii) Joint and several liabilities for the payment of entities subject to joint taxation.
The Ministry of Taxation expects that the planned initiatives will increase tax revenue in 2013 by app. DKK 625 million (app. EUR 84 million). As such the announced initiatives can be seen as part of a general European trend to increase tax revenue.
The initiatives are likely to have an impact on multinationals incurring losses or limited profits in Denmark as well as nationals or multinationals incurring losses in Denmark due to large research and development investments as the possibilities of carrying such losses forward will be restricted. Furthermore, the planned initiatives give reason for nationals as well as multinationals to increase their efforts with regard to providing necessary and sufficient documentation for group-internal transactions.
(Soruces: Skatteministeriet – pressemeddelelse and notes from http://www.skat.dk/getFile.aspx?Id=89166.)