• Professional News
  • 06 July 2017

New model for dividend taxation

The Danish Ministry of Taxation recently announced that a new model for dividend taxation will be implemented. The new model implies that dividends on listed shares will be taxed at the correct tax rate already when such dividends are paid to the recipients. The new model covers only dividend payments to foreign recipients. This means that the current administrative practice of repayment of withholding tax will be abandoned in relation to foreign recipients. 

The new model for dividend taxation is a result of recommendations made by an interdisciplinary and interministerial withholding tax working group set up to assess the need for adjusting the existing rules governing withholding tax on dividends due to fraudulent tax reclaims amounting to DKK 12.3bn (approx. EUR 1.65bn) in the period from 2010 to 2015.        

As a result of the fraudulent tax reclaims, the Danish tax authorities suspended all payments in respect of claims for repayment of Danish withholding tax on dividends in August 2015. In March 2016, the Danish tax authorities resumed the processing of tax reclaim applications. However, withholding tax is only repaid in cases where the Danish tax authorities have a high degree of certainty for the documentation received. 

When the new model becomes effective, the Danish tax authorities will collect information on, for example, ownership and the tax residency of the shareholder before any dividends will be paid to the recipients. This will ease the control of the Danish tax authorities in relation to the tax withheld on dividends when dividends on listed shares are paid.
The new model will also apply to shareholdings in omnibus and nominee accounts.

As mentioned above, the possibility of repayment of withholding tax will be completely eliminated for foreign recipients with respect to listed shares when the new model has been implemented. This will prevent the risk of fraud in relation to dividend tax reclaims and ease the administration of the Danish tax authorities. 

A bill on the new model for dividend taxation has not yet been introduced, and more detailed information on the new model is not available at present. The Danish Parliament concluded its ordinary legislative work on 5 June 2017, and the work will probably not be resumed until the new parliamentary year begins on 3 October 2017. Accordingly, a bill on the new model will be introduced in the autumn of 2017 at the earliest. In that respect, we expect that a draft bill will be issued for consultation before being formally introduced to the Danish Parliament.
The final report of the interdisciplinary and inter-ministerial withholding tax working group was released on 26 June 2017.

A bill on the new model for dividend taxation has not yet been introduced, and more detailed information on the new model is not available at present. According to the Danish government’s legislative agenda for 2017/18 it is expected that a bill on the new model will be introduced in the spring of 2018.

 

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