The Ministry of Taxation submitted a law proposal (L 123) to the parliament on 23 February 2016, amending several laws. The proposal includes the following amendments:
Participation exemption:
-The rules on the participation exemption are enhanced by amending the definition of subsidiary shares. Accordingly, the participation exemption applies if the subsidiary is resident in a jurisdiction that exchanges information in tax matters with the Danish tax authorities.
Withholding tax on dividend:
–The general withholding tax on dividends paid by Danish companies to foreign entities is reduced to 22% (currently, 27%). The proposal entails that the current 27% rate violates the freedom of establishment under article 49 of the Treaty on the Functioning of the EU (TFEU) as the rate imposed on companies resident in other EU/EEA states is higher than the corporate income tax rate on Danish companies.
Anti-avoidance rule:
–A new anti-avoidance rule in respect of investment funds and unit trusts is introduced in order to prevent foreign investors to avoid Danish withholding taxes. The amendment has retroactive effect from 23 February 2016.
Permanent Establishments:
–Further, the recapture rules of foreign permanent establishments of Danish companies being taxed under the group consolidation regime are amended to reflect the judgment by the ECJ in Nordea Bank (Case C-48/13). The amendments are planned to enter into force from 1 July 2016.
