Denmark

Market overview

Denmark's tax market has been heavily influenced by international trends, such as the OECD's BEPS project and the European Commission's Anti-Tax Avoidance Directive. The BEPS transfer pricing (TP) documentation requirements, including country-by-country reporting (CbCR), came into effect on January 1 2016. This has been a challenge for companies and has kept practitioners busy.

"BEPS is on everyone's mind," said EY head of tax, Vicki From Jørgensen.

"We are a small country and tax laws change, normally, all the time. However, we haven't seen a lot of amendment this past year so I would say the main emphasis and focus has been on international tendencies; it's been BEPS but it has also very much been EU related," said Jakob Bundgaard, head of tax and transfer pricing at CORIT Advisory.

Although BEPS has been a main topic this year, the anti-avoidance rules are starting to steal the spotlight. Denmark already has various anti-avoidance rules in place, including anti-hybrid entities rules, anti-hybrid loans rules and sophisticated interest limitation rules. "We now have all the BEPS reports prepared by the OECD in the last year and of course that is changing a lot of things in tax law. But I think the thing with Denmark is that in the past decade, Denmark has been the front runner in introducing anti-avoidance rules in all different areas," said Ole Schmidt, managing partner at KPMG Acor Tax.

The tax authorities have been under a lot of pressure and scrutiny after the country's biggest tax fraud. In August 2015, the authorities alerted police after foreign companies appeared to have drained more than €800 million ($893 million) from the system. This reflected negatively on multinationals' transfer pricing, an area which was already under some scrutiny from the tax authorities who have become more aggressive and have launched more audits over the past couple of years.

"They [the authorities] are struggling and trying to find the right approach and some initiatives have been launched, of course with the purpose of getting back on track," said Bundgaard. "That includes for instance a code of conduct for the employees and I'm sure they wouldn't develop a code of conduct, if the conduct was just plausible."

This has resulted in an increase in the demand for TP services. "Transfer pricing is very much in demand and general compliance and corporations have been even more cautious about their tax planning," said Nikolaj Bjørnholm, founder of Bjørnholm Law.

As taxpayers adjust to the changing tax environment and the tax authorities' attitudes, practitioners have been busy advising on all transfer pricing areas. "It has been a year where people try to consolidate and try to come to terms with what the new changes and new tax environment will be," said From Jørgensen.


Tax authorities

Ministry of Taxation – Skatteministeriet
Nicolai Eigtveds Gade 28, DK- 1402 Copenhagen K
Tel: +45 33 92 33 92
Fax: +45 33 14 91 05
Email: skm@skm.dk
Website: www.skm.dk


Tax rates at a glance

(As of April 2016)

Corporate income tax 22%
Capital gains tax 22%
Branch tax rate 22%
 
Withholding tax
Dividends 27%
Interest 22% (a)
Royalties 22% (b)
 
Net operating losses (years)
Carryback 0
Carryforward Unlimited

  1. The 22% rate applies to payments on or after March 1 2015.
  2. The 22% rate applies to payments on or after March 1 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.
  3. A Danish branch office or a tax-transparent entity may be recharacterised 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.

Source: EY 2016 Worldwide Corporate Tax Guide


Firm contact details

Bjørnholm Law