Danish resident companies may reclaim preliminary taxes

25 September 2015

Some Danish resident companies may benefit from the possibility to reclaim voluntary prepaid taxes or part hereof that has been paid before 3 July 2015. The taxes should be reclaimed no later than 1 October 2015.

The Danish Parliament has adopted a proposal by the Minister of Taxation to amend the rules of the Danish Corporate Tax Act concerning interest on corporate taxes.

Consequently, the interest rates for companies’ residual and surplus taxes are changed in order to narrow the gap between these interest rates and the interest rates of banks.

Further, negative interest is introduced on voluntary prepaid taxes that are reclaimed. This happens when refunds occur during periods where the central bank of Denmark's deposit interest rate plus 0.2 percentage points is below zero.

Currently, this is the case. The deposit interest rate has been -0.75 percent since 6 February 2015.

Pursuant to a special transitional rule, however, a possibility exists for companies to request a refund of preliminary taxes that have been paid voluntarily before 3 July 2015 without having to pay negative interest.

However, this requires that applications for refunds are submitted on 1 October 2015 at the latest.

The option to apply for a refund is relevant for companies that have made voluntary prepayments of taxes in March 2015, but at this point anticipate that the total preliminary taxes for 2015 will exceed this year's final taxes. Consequently, such companies will be eligible for tax refunds.

One possibility is for these companies to wait for a refund of surplus taxes in November 2016. If they do, they will - according to another transitional rule - be entitled to compensation of 1 percent of the part of the surplus taxes that is attributable to preliminary tax payments made before 3 July 2015.

Another option for these companies is - if they cannot wait until November 2016 to receive the surplus tax - to apply for a refund. This can be done at any time.

However, requests for refunds submitted subsequent to 1 October 2015 will be subject to payment of negative interest due to the current deposit interest rate.

Hence, it can be concluded that companies that cannot wait until November 2016 to receive a refund of surplus taxes can benefit from applying for a refund no later than 1 October 2015.

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.