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Anti-Abuse Bill Restricts Dividend Witholding Tax
The new Anti-Abuse Bill follows a line of high profile court and administrative cases on the issue of beneficial ownership and illustrates a tendency towards tightening the Danish dividend withholding tax rules to ensure that only beneficial owners in qualifying jurisdictions will qualify for the Danish dividend withholding tax exemption. Taxand Denmark investigates how the new Anti-Abuse Bill will affect share transfers by corporates.
A new Danish Bill has been presented to the Danish Parliament which introduces withholding tax on certain intra-group sale of shares. The bill effectively targets transactions aimed at repatriating funds from Danish companies but could potentially affect a large number of intra-group transactions and restructurings.
The bill entails that any payment for shares in a group related Danish company will be considered dividends subject to Danish dividend withholding tax if:
- The shares in a Danish company is transferred by the seller to another group related company
- The payment for such shares is in a form other than shares (e.g., a debt claim issued by the buyer)
- The seller:
- Does not qualify for tax exemption on receipt of dividends or contributions from the buyer (if the seller is the legal entity)
- Is not domiciled in the EU/EEA or a tax treaty jurisdiction (if the seller is an individual).
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The Bill is another example of the Danish Government's disdain of the Danish investment climate. If enacted, the legislative proposal could potentially affect a large number of intra-group transactions and restructurings - not least in connection with an exit from investments in Denmark. It will undoubtedly add to the disrepute of Denmark as an unstable investment jurisdiction and reduce foreign investments into Denmark.