Permanent establishment - Foreign investors in Danish partnerships(Taxwatch (Tax news in english))
19-05-2010 08:25
Af
Karsten Gianelli
Partnerships – limited as well as unlimited – are not regarded as separate entities for tax purposes in Denmark. Thus, the assets and obligations of the partnership are for tax purposes regarded as owned directly by the partners and the partnership’s profits and losses are, consequently, taxed directly at the level of the partners.
It is, therefore, of particular interest to foreign investors whether or not an investment in a Danish partnership automatically results in Danish taxation of the investor’s share of the profit or loss in the partnership.
The Danish National Tax Tribunal has recently made a ruling on this issue. The ruling concerned a Fund-of-Funds project organized as a Danish limited partnership aimed at Danish and foreign investors. The partnership was registered in Denmark but did not have any offices or employees in Denmark. The partnership’s investments were administered by an independent Danish administrator.
The Tax Tribunal concluded that the structure would only result in Danish taxation of foreign investors in the partnership, if the partnership could be regarded as having a permanent establishment in Denmark. As the partnership did not have any fixed place of business, i.e. own offices with own employees, it could not constitute a permanent establishment for tax purposes for any foreign investors. Therefore, the foreign investors in the partnership would not be liable to any Danish taxation of their share of the profits and losses of the partnership.
Thus, the mere fact that a partnership is registered in Denmark cannot in itself constitute a permanent establishment for tax purposes for any foreign investors in the partnership.
Questions can be addressed to Karsten Gianelli at kgi@bdo.dk
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