Overview of proposed initiatives by the Danish government

27 October 2017

In connection with the opening of the new session of the Danish Parliament, the government presented its list of intended legislation for the coming year.  

With regard to taxation, the list comprises 23 bills. This does not include the bills necessary to carry out the political agreements negotiated based on the government’s recent tax and business initiative. Hence, the actual number of proposed bills by the Minister of Taxation is expected to exceed the number initially notified.

Among the intended tax legislation, the following can be highlighted:

  • A modernisation of the rules concerning commencement of tax residence for individuals living abroad, also having a home available in Denmark.
  • As part of the so-called North Sea Agreement, the Minister of Taxation will propose to abolish the scheme of a permanent interest-free loan to export businesses, corresponding to a share of their negative VAT.
  • The Minister will propose a bill to regulate businesses' access to deductions for salary expenses of their own employees, regardless of the work performed. The purpose of the bill is to extend the right of deduction for businesses’ wage expenses, etc. in connection with the establishment, restriction or extension of the business. The expansion of the deduction right is proposed on the basis of two principal judgments of the Supreme Court, where it has been established that businesses do not have the right to deduct wage expenses when establishing new businesses or expanding existing businesses.
  • The Minister of Taxation will propose a bill that will allow businesses to be transferred to foundations with tax succession - thus, without taxing the seller.
  • There is also a bill introducing new rules for the withholding of tax on dividends distributed by listed companies. This entails that reimbursement of dividend tax will not be required in the future.
  • As part of initiatives by the government to strengthen the rule of law with regard to taxation, proposals will be made for a modernisation of the Tax Control Act and a new Reporting Act. Further, a limitation of the Danish tax authorities’ ability to withdraw binding rulings on valuation of assets is proposed. See tax:watch 2017 no. 9 for more information on this matter.
  • The Minister of Taxation will make a proposal to amend certain tax rules for pension savings, including a reduction of the possibilities for contributing to certain pension schemes, but also to extend the maximum pay-out period for retirement pensions that are payable in instalments from 25 years to 30 years.
  • Further, the Minister of Taxation has proposed a change in the Registration Tax Act for the purpose of implementing the recently concluded political agreement on the conversion of car taxes.
  • The Minister of Taxation also proposes a bill in order to conclude a double tax agreement between Denmark and Azerbaijan. The main purpose is to avoid international double taxation between the two countries. This improves the tax conditions for companies and individuals of the two countries in cross-border investments, work etc.
  • With respect to double tax agreements, a bill is proposed allowing Denmark to ratify the Multilateral Convention designed to amend existing double tax agreements in order to swiftly implement the BEPS initiatives by OECD (Base Erosion and Profit Shifting).

The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge. Please sign up here.