New anti-abuse rules introduced retroactively from 3 October 2012
On 14 December 2012 the Danish Parliament passed the draft Bill (L 10) introducing new antiabuse rules responding to unintended consequences of the earlier rules, i.e. respond to the possibilities to avoid Danish taxes and/or foreign taxes by using Danish companies. These rules will apply retroactively from 3 October 2012.

The measures are intended to close certain loopholes for avoidance of the Danish with holding tax rules on dividends paid by Danish companies, but are also against the use of Danish companies as “conduit companies” for dividends from foreign companies to parent companies in non-EU member countries. Finally, rules are introduced pertaining to the place of management of Danish companies.

The highlights of the Bill are summarized below. 

Avoidance of dividend withholding tax
First of all, artificially structures are attacked that convert taxable dividends into tax exempt payments. The Danish Ministry of Taxation mentions the following example: a foreign company sells its shares in a Danish subsidiary to a new Danish holding company, whereby the selling price is indebted by latter company. 
Subsequently, the Danish subsidiary distributes a dividend to the new Danish holding company, which then repatriates this dividend by repaying its debt to the foreign company without incurring any tax. Consequently, the Danish dividend withholding tax is avoided.

Under the new rules, the remuneration in case of group-related transfers of shares will be characterized as a dividend subject to dividend withholding tax if the remuneration is either entirely or partly not in the form of shares (but e.g. in cash or a debt instrument).The transfer will trigger a 27% Danish withholding tax -- regardless of whether the transferring company is resident or non-resident --, unless the transferring company qualifies for protection under the EU Parent-Subsidiary Directive or a double tax treaty.

Anti-avoidance rules for conduit companies
Under the Danish holding company regime dividends distributed by a Danish company to a foreign parent company may be exempt from Danish withholding tax provided that the foreign parent company is resident within the EU or in a jurisdiction that has entered into a double tax treaty with Denmark.

However, in recent years the Danish tax authorities have tried to deny this benefit if the Danish intermediate holding company has been interposed for the sole purpose of treaty shopping, by arguing that the foreign parent company is not the beneficial owner of the dividend.

Under the new rules, exemption from Danish withholding tax on dividends paid by a Danish company to a foreign parent company no longer if the dividends paid by the Danish company to the foreign parent company stem from dividends that the Danish company has received from a foreign subsidiary, and the Danish company is not the beneficial owner of the dividends received from the foreign subsidiary. The new rule does not apply if no dividend withholding tax is due under to the EU
Parent-Subsidiary Directive.

Danish tax liability and the place of management
The Danish tax liability rule that depends on the place of registration will be expanded to include any company registered with the Central Business Registry. The tax liability of a company, other than a public or private limited company, previously depended on the company having its effective place of management in Denmark.

Under the new rules, a company is regarded to be resident in Denmark for Danish tax purposes if the company is either registered in Denmark or has its place of effective management in Denmark. 

The end
It is expected that these new anti-abuse rules will bring forward the end of Denmark as a location to base an (intermediate) holding company.

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