The Danish Supreme Court has ruled that claims for refunds of over-withheld dividend and royalty taxes are subject to a five-year limitation period under Section 67 A of the Withholding Tax Act, rejecting a 2016 administrative practice that applied a three-year deadline.
The Danish Supreme Court (Højesteret) issued a ruling in Cases BS-36976/2025-HJR and BS-36974/2025-HJR on 11 June 2026, concerning the limitation period (statute of limitations) for claims seeking refunds of withheld dividend and royalty taxes. The cases involved the Ministry of Taxation and three taxpayers (A, B, and C), who sought refunds on the grounds that Danish companies had withheld tax in excess of the amounts payable under applicable double taxation agreements.
Core dispute
The central legal question was whether these refund claims were subject to the standard three-year limitation period found in the Limitation Act or the extended five-year limitation period specified in Section 67 A of the Withholding Tax Act (Kildeskatteloven).
- The Ministry of taxation’s position: The Ministry argued that the five-year period in Section 67 A only applied to the tax authorities’ claims against the companies responsible for withholding the tax, not to the refund claims made by the taxpayers themselves.
- The taxpayers’ position: The taxpayers argued that their refund claims were “claims covered by Sections 65-65 D” as stated in Section 67 A, and that the legislative history supported a five-year window.
Historical context
From the introduction of Section 67 A in 2010 until 2016, the Danish tax authority (SKAT) had officially practiced a five-year limitation period for such refunds. However, in June 2016, SKAT issued a “steering signal” (SKM2016.263.SKAT) changing this practice to a three-year period, claiming the previous interpretation was incorrect.
The Supreme Court’s reasoning
The Supreme Court reached its decision based on several factors:
- Ambiguity of wording: The Court found that the text of Section 67 A was not entirely clear on whether it specifically included or excluded taxpayer refund claims.
- Legislative intent: The legislative history (preparatory works) for Section 67 A explicitly stated that “claims for recovery of too much withheld tax” should be able to occur within the five-year period. The Court interpreted this as referring primarily to the claims raised by taxpayers, as these are the most common.
- Systemic consistency: The Court noted that the five-year period was intended to align these cases with other complex tax matters, such as transfer pricing and corporate restructurings, which also carry a five-year limitation period for both the authorities and the taxpayers.
- Previous administrative practice: The Court emphasised that the tax authorities themselves had understood and administered the law using the five-year period for several years after its enactment.
The final result
The Supreme Court ruled that the five-year limitation period applies to claims for the refund of withheld dividend and royalty taxes. Consequently, the Court found that the tax authorities lacked the legal basis for the 2016 practice change that had shortened the period to three years.
