• Professional News
  • 06 July 2017

New model for dividend taxation

The Danish Ministry of Taxation has 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.This means that the current administrative practice of repayment of withholding tax will be abandoned.

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

When the new model becomes effective, SKAT 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 SKAT 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 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 SKAT.

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. We expect that a draft bill will be issued for consultation before being formally introduced to the Danish Parliament.

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