Bill on defensive measures against EU blacklist countries

27 November 2020

Arne Riis, Partner, Tax |

The bill introduces defensive measures and sanctions against countries that do not live up to international tax standards and good tax practices. The Danish Ministry of Taxation submitted the new bill to public consultation on 12 November 2020.

The Council of the European Union declared in 2019 that defensive measures against the countries on the EU blacklist must be implemented in national law effective from 2021. The objective is to avoid international tax evasion.

By introducing sanctions across all EU-member states, the countries listed as non-cooperative in the blacklist are expected to change their national laws gradually and thereby eliminating the tax havens.

The countries on the EU-blacklist are American Samoa, Anguilla, Bangladesh, United States Virgin Islands, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, Seychelles and Vanuatu. 

The bill which has been disclosed for public consultation introduces following main sanctions:

  • Deductibility
    Payments to parties that reside or are registered in the blacklisted countries will not be deductible in the calculation of taxable income by persons or enterprises subject to Danish taxation. The payments that are covered by the changes are payments when acquiring assets, services etc. Included are also payments regarding loans and credits e.g. interest rates. 
  • Taxations of dividends 
    The dividends derived from a Danish company will be subject to a higher tax on 44 % that is required to be withhold by the Danish company if the recipient is a resident in the mentioned blacklisted countries. 

The deadline of the public consultation is 9 December 2020 and we expect an introduction of the bill in the Danish Parliament shortly hereafter. If adopted in its present form, it is decided in the bill, that the amendments take effect 1 July 2021.

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.