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Danish holding companies(Taxwatch (Tax news in english)) 

Denmark is a unique place for establishing a tax effective holding structure. The Danish holding regime is regarded as more competitive than the Dutch holding regime.
 
The main features of the Danish holding regime can be summarized as follows:

• Inbound dividends from a foreign subsidiary may as a main rule be received tax exempt in Denmark by a Danish parent company.
• Outbound dividends may be paid with no withholding tax from a Danish holding company to a foreign parent company in another EC country or in a tax treaty country.
• As of January 1, 2010 capital gains on shares in Danish and foreign subsidiaries in other EC countries or in tax treaty countries are tax exempt for a Danish parent company irrespective of the ownership period.
• Foreign parent companies are not taxable in Denmark on capital gains/liquidation revenue on Danish shareholdings unless the parent company is situated in a country outside the EC or in a non tax treaty country.
• No capital duty is payable neither in connection with the establishment of a holding company or in connection with a subsequent capital increase.
• There is no withholding tax on outbound interest unless the recipient is a parent company situated in a tax haven.
• It is easy and inexpensive to establish and wind up Danish holding companies.
• It is possible to enter into voluntary tax consolidation with foreign subsidiaries. This will allow deduction for the subsidiary’s tax losses against the income of the Danish tax group.
• Denmark has an extensive network of double tax treaties with other countries.

Parent companies
A parent company is a company holding at least 10 % of the shares in the subsidiary.

Inbound tax exempt dividends
Inbound dividends may be received tax exempt by a Danish company if one of the below 3 conditions are fulfilled:

1. The dividend paying company is resident in a country with which Denmark has a double tax treaty.
2. The dividend paying company participates in an international tax consolidation in Denmark.
3. The Danish company must either directly or indirectly have decisive influence over the dividend paying company, e.g. hold a majority of the votes.

Outbound tax exempt dividends
Outbound dividends are tax exempt in Denmark if the recipient is a parent company in either another EC country or in a tax treaty country.

Capital gains on shares
Capital gains on shares realized by a non resident shareholder are as a main rule not taxable in Denmark.
 
However, if the shareholder is a parent company resident in a tax haven, the sales price/liquidation revenue is treated as dividends resulting in a 28 % withholding tax. 

Withholding tax on interest payments
As a starting point a withholding tax of 25 % of all intra group intra payments from a Danish company to a controlling foreign company must be withheld.
 
However, in the below situations there are no withholding tax on such interest payments.

1. If taxation must be reduced or waived according to a tax treaty.
2. If the taxation must be waived according to the EU interest/royalty directive.
3. If the creditor company is controlled by a company situated in a double tax treaty country and if this company is covered by the CFC rules of that country.
4. if it can be proved, that the company would not have been covered by Danish CFC rules, if it was controlled by a Danish company.

Questions to this article can be directed to Hans-Henrik Nilausen at HHN@bdo.dk