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Reduced Rate for Reclaiming Withholding Taxes


On 13 June 2012, the Danish Parliament passed a new bill targeted at Danish subsidiaries of multinational companies, with the primary aim of preventing corporate tax avoidance. A reduction of the interest rate applied to reclaims of withholding tax was included in the proposed bill during the second parliament hearing on 12 June 2012. Apart from the provision on interest, the adopted proposal was largely identical to the bill presented to the Danish parliament on 25 April 2012. Taxand Denmark considers the contents of the bill and the impact this may have on Danish taxpayers.

The new bill was presented to the Danish Parliament on 25 April 2012. In our article Bill Targets 'No Tax Corporations' , the proposal's main areas of interest included carry forward restrictions. During the second hearing of the bill in the Danish Parliament, an amendment to the proposed bill was passed concerning interests on withholding tax reclaim application.

Under the new interest rules, persons or companies filing reclaim of withholding tax with the Danish Tax Authorities may only receive interest on their claim, if the reclaim is paid later than 6 months after the date of filing the reclaim application. The interest rate applicable will be set at 1.3 % p.a (2012) instead of 7.45 % (June 2012).

In addition, the Danish Tax Authorities may require the applicant to provide security prior to repaying tax withheld, if (i) the withholding tax reclaim remains to be disputed in a tax controversy at the time of payment and (ii) the authorities find that the applicant may not be able to repay the withholding tax if ultimately found liable to pay such withholding tax.

The new rule applies to withholding tax reclaim applications which have not been finally processed by the Danish tax authorities by 30 June 2012, regardless of when the reclaim was filed and whether or not the reclaim is for tax withheld prior to 1 July 2012.

Taxand's Take

Despite serious concerns raised by the Danish business community, the bill was passed by a narrow margin in the Danish Parliament. The new reduced interest rate and possible requirement for security prior to repayment of reclaimed withholding tax is expected to make the dividend withholding tax reclaim process more cumbersome, and unfortunately further adds to the generally negative impact of this new bill for Danish companies and foreign investors in Danish companies.

Your Taxand contacts for further queries are:
Anders Oreby Hansen
T. +45 72 27 36 02

Arne Riis
T. +45 72 27 33 22


Taxand's Take Author