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New Tax Treaty between Denmark and the Cayman Islands

27 May 2010

A new taxation agreement between Denmark and the Cayman Islands was announced on 12 January 2010. The agreement came into force on 6 February 2010 with effect from 1 January 2011. Taxand Denmark reviews the new tax treaty and similar agreements which have recently taken place.

The agreement concerns three topics:

  • Exchange of information in taxation matters.
    • This enables Denmark to obtain information from the Cayman Islands for the purpose of taxation. If the authorities of the Cayman Island do not already hold the concerned information, they are obliged to obtain information from the relevant companies and persons. Consequently, the withholding tax on outbound dividends drops from 28 percent to 15 percent for shareholders holding less than 10 percent of the profit-yielding company, cf. the Danish Corporation Tax Act. In tax criminal cases, special rules apply relating to the date of effect.
  • Access to mutual agreement procedures in connection with the adjustment of profits of associated enterprises.
    • The tax authorities of the two jurisdictions are obliged to contribute in resolving double taxation conflicts resulting from a controversy concerning transfer pricing by intercompany transactions.
  • Avoidance of double taxation of both individuals and enterprises operating ships or aircraft in international traffic.

Other Similar Agreements
Similar exchange of information agreements have been entered into with Aruba, Bermuda, the British Virgin Islands and the Netherlands Antilles.

Furthermore, as for Bermuda and the British Virgin Islands, the agreements also concern avoidance of double taxation and mutual agreement procedures in connection with the adjustment of profits of associated enterprises.

On 12 December 2009 the agreement with Bermuda was announced. It came into force on 1 January 2010. None of the remaining agreements have come into force or been announced.

The conclusion of all these agreements is part of OECD's effort to fight harmful tax practices.

Taxand's Take

The agreement brings rules on exchange of information into line with the OECD Model Tax Convention. Thus, the Cayman Islands are now committed to obtaining and providing information from their financial institutions to share with the Danish authorities, on the condition that the Danish authorities have requested such information in the first place.

For more information read Taxand Denmark's recent article on new treaties on double taxation and exchange of information in tax matters

Your Taxand contact for more information is:
Anders Oreby Hansen
T. +45 72 27 36 02

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