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Withholding tax on outbound payments(Skat og moms) 

There are no withholding taxes on other outbound payments such as for instance interest payments to individuals, different kinds of fees and as a main rule capital gains on shares.

Outbound dividends
A foreign recipient of dividends from a Danish company is limited tax liable.

The withholding tax rate is 28 %. The withholding tax rate may be reduced according to a tax treaty. A tax treaty often reduces the Danish withholding tax to 15 %.

Excess withheld tax can be refunded by filing a form with the Danish tax authorities.
 
Outbound dividends from a Danish subsidiary to a foreign parent company in another EC/EØS country or in a tax treaty country may be paid without Danish withholding tax. A parent company is a company holding at least 10 % of the shares in the subsidiary.

Outbound royalties
A foreign recipient of royalties from Danish sources is limited tax liable.

The withholding tax rate is 25 %. The withholding tax rate may be reduced or waived according to a tax treaty, which will often be the case.

Excess withheld royalty tax can be claimed back by filing a form with the Danish tax authorities.

Outbound interest payments
As a starting point, all intra group interest payments from a Danish company to a controlling foreign company are limited tax liable. The withholding tax rate is 25 %.

However, this withholding tax will for practical purposes only apply, if the interest payments are made to a group company situated in a tax haven as the withholding tax will not apply in the following situations:

1. If taxation shall be reduced or waived according to a tax treaty. This will be the case for almost all the Danish tax treaties.
2. If the taxation shall be waived according to the EC interest/royalty directive. This will cover payments to all other EC countries.
3. If the creditor company is controlled by a company resident in a tax treaty country and if this company is covered by the CFC legislation of that country.

In Denmark a tax haven country is defined as a jurisdiction, where income taxes are nil or very low compared to the Danish taxation.

As examples on tax haven can be mentioned:   Bahamas, Guernsey, Jersey, Barbados, Belize, Cayman Islands and The Seychelles.

No withholding tax
As a main rule there is no withholding tax on capital gains on Danish shares realized by a foreign shareholder by sale or liquidation.

However, if the shareholder is a parent company resident in a country outside the EC or in a non tax treaty country, the liquidation revenue is treated as dividend and the withholding tax rate of 28 % for dividends will apply.

There is no withholding tax on interest payments to all other creditors than an affiliated company in a tax haven country.

As a main rule there is no withholding tax on fees such as management fees, consultancy fees and other fees paid from
Denmark to a foreign recipient.

Questions to this article can be directed to Hans-Henrik Nilausen on phone +45 3915 5320 and email hhn@bdo.dk