The Danish Minister of Taxation published a draft bill on 5 October 2015. This draft bill planned to relax the taxation of certain categories of outbound and inbound dividends in order to comply with European Union (EU) law. However, the proposals will have effect from 1 July 2016.

The proposals in the Draft Bill are summarized below:

Outbound dividends: It is proposed that the general tax rate applicable to non-resident companies is reduced from 27% to 22%. This applies whether the recipient company is tax resident in another EU country or a third country. A WHT of 27% must still be applied, so the recipient company must request a refund of 5%.

Therefore, nonresident companies have been subject to dividend taxation at a higher rate compared to resident companies since 2007 when the corporate tax rate was reduced to 25%. Nonresident Companies that have suffered Danish taxation at a rate of 27% in previous years may thus consider filing a refund claim for the difference between the 27% tax paid and the corporate tax rate applicable at the time of the distribution.

Inbound dividends: It is proposed that the tax exemption for dividends on subsidiary shares should no longer be dependent on the requirement that taxation is reduced under a tax treaty or the EU Parent and Subsidiary Directive. However, the distributing company should be subject to corporate tax in its country of residence.

The proposal means that Danish companies will now be able to receive tax-exempt dividends from companies in which they own between 10%-50% of the share capital and which are tax resident in third states that have not concluded a tax treaty with Denmark. Resident companies that were subject to tax on subsidiary shares issued by companies in third countries in previous years may consider requesting the tax return for previous years to be reopened, since such taxation may have been in breach of EU law.