Denmark

Market overview

Denmark has been a participant in the OECD's BEPS project from the beginning and the Danish government has adopted many of the recommended measures into domestic law. Among them are the formal standards for TP documentation: country-by-country reporting (CbCR), master file and local file. The adjustment has posed challenges for business and created plenty of work for TP practitioners.

Denmark has made great efforts to align its tax system with the BEPS project and most of the new anti-avoidance rules have been adopted by Danish law, including hybrids, controlled foreign company (CFC) rules and interest deductions, as well as treaty abuse prevention and permanent establishment status.

Although international trends have been of major importance, the leading domestic concern has been the reorganisation of the Danish tax authorities. After a series of major scandals, the Danish Tax Administration (SKAT) is due to be replaced with seven agencies in July 2018. Five of these will be based outside of Copenhagen, with a fresh intake of staff to expand SKAT's reach.

"All parties in parliament have recognised that the tax authorities are dysfunctional and something needs to be done. There is a big political will to provide the resources and make this happen," said Nikolaj Bjørnholm, founder of Bjørnholm Law.

Tax and TP professionals are generally optimistic about the reorganisation. The complete overhaul of SKAT may bring about the end of IT problems, which have hindered tax collection in recent years, as well as putting a stop to fraudulent tax refunds. However, it will still be down to the new agencies to prove they can overcome these scandals and not repeat past mistakes.

These developments have led to a rise in demand for TP services across the Danish market, particularly compliance and planning, before things go to court. Litigation and disputes are expected to be key growth areas as the tax reforms are consolidated and clients are facing greater scrutiny.


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 July 2017)

Corporate income tax 22%
Capital gains tax 22%
Branch tax rate 22%
 
Withholding tax
Dividends 0/15/22%
Interest 0/22% (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 and Deloitte


Firm contact details

Bjørnholm Law