Adoption of an international anti-abuse clause in Danish tax law

27 March 2015

In a new draft bill, the Danish government proposes adoption of an international anti-abuse clause in Danish tax law. The clause is scheduled to take effect from 1 May 2015.

Based on recently introduced EU legislation, the Danish government proposes a bill that will implement an international anti-abuse clause in Danish tax law.

The international anti-abuse clause will prevent tax payers from benefitting from Danish double tax treaties and several EU-directives concerning international taxation with respect of company reorganizations, payments of dividends, interests and royalties if the main purpose or one of the main purposes of the arrangement is to achieve a tax advantage contrary to the purpose of the EU-directive or double tax treaty.

Although implementing rules designed to prevent tax evasion may seem like a beneficial initiative, the international anti-abuse clause in the draft bill is disturbingly vague in its wording. Neither the comments to the draft bill provides much guidance as to how the clause will be applied by the Danish tax authorities. This seems detrimental to other government efforts to attract foreign businesses to Denmark due to the significant uncertainty associated with an unclear tax position. Hopefully, this will change during the legislative process in the parliament.

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.