Denmark

Corporate - Significant developments

Last reviewed - 03 August 2020

DAC6

The implementation of the European Union (EU) Directive on Administrative Cooperation (DAC6) in Danish law is completed, as the bill was approved on 19 December 2019. The Executive Order setting out the details of the implementation was published 31 December 2019. On 17 April 2020, the tax agency published DAC6 guidance that contains various examples and the tax agency's interpretations of the Directive. The Danish implementation and interpretation is similar to the wording of the Directive. 

DAC6 imposes mandatory disclosure requirements for certain arrangements with a cross-border element that meet certain criteria (so-called hallmarks) that are seen to present a potential risk of tax avoidance. The reporting obligation is effective for such cross-border arrangements entered into as of 25 June 2018 with reporting starting on 31 August 2020.

Note (July 1 2020): In the view of the current situation, it has been decided to grant a postponement in regard to the reporting that must be made to the Danish tax authorities. The Danish Ministry of Taxation has postponed the reporting deadlines: 

  • The deadline for the reporting of reportable cross-border arrangement in the retroactive period 25 June 2018 to 30 June 2020, has be postponed from 31 August 2020 to 28 February 2021.
  • The 30-days deadline for reporting arrangement as of July 1, 2020 has been postponed from 1 July 2020 to 1 January. 

However, as of 1st July it is possible to report arrangements to the Danish tax agency, even though the deadlines have been postponed.   

Interest rate for underpaid tax

As a part of the financing of the Danish Finance Act for 2019, the interest rate for underpaid tax was increased with a fixed charge of 2%, which increases the interest rate for underpaid tax to 4.7% for income year 2019 (compared to the 2.8% applicable in 2018). This increase also affects the charge on voluntary payments made between 21 November to 1 February, which was increased to 0.9%.

ATAD implementation

On 6 November 2019, the Danish Ministry of Taxation proposed Bill L48 (2019-20) regarding the remaining implementation of the EU Anti-Tax Avoidance Directives (ATAD). The bill included the implementation of the controlled foreign company (CFC) rules of the EU ATAD in Danish tax law. Further, the Bill introduced adjustments to the rules regarding permanent establishment (PE), deduction of losses incurred by foreign subsidiaries, PEs and real estate located abroad, and a requirement to submit the transfer pricing documentation within the deadline for filing the annual corporate income tax (CIT) return. Whereas most of the items have been adopted into Danish law, certain items (including the changes to the CFC rules and the PE definition) are still not adopted as of 1 July 2020. The proposed new CFC rules may have a significant impact on taxation of Danish-based multinational companies. See the Proposal implementation of the EU Anti-Tax Avoidance Directive (ATAD) section for more information

Note: As a result of the COVID-19 situation the adoption of the L48 bill has been postponed. This bill is not expected to be finalised in the current parliamentary period.  

Deadline for filing tax return

Due to the outbreak of COVID-19 in Denmark, the Danish Ministry of Taxation has extended the filing deadline for corporate tax returns for income year 2019 from 20 June till 1 September 2020, including the deadline for the contemporaneous transfer pricing documentation for income year 2019. In addition, the reading of Bill L48 has been postponed.

COVID-19

For more information regarding the Danish initiatives in relation to COVID-19 please visit: https://www.pwc.dk/da/covid-19/government-financial-support-packages.html

Potentially new dividend tax regime in Denmark from 2023

The Danish Ministry of Taxation has entered into an agreement with Finance Denmark regarding a new regime for withholding of dividend tax which is intended to be easier to manage and prevent dividend tax fraud in the future. If implemented, the new regime will deduce the dividend tax at the correct rate according to the double taxation agreements, etc., when dividend is distributed (relief at source). This is contrary to today, where excess withheld tax must be recovered from the Danish tax authorities by withholding tax reclaim. The bill to introduce the new regime has been postponed several times. The Ministry of Taxation has recently announced that the bill is expected to be put forward in the parliamentary year 2020/2021, why the new regime is expected not to come into effect until 2023.  

Further increased deduction for R&D costs

The Danish Parliament has entered into an agreement regarding an increased deduction for R&D costs in 2020 and 2021. The deduction is increased to 130% for a maximum of DKK 50 million of costs.

The bill has not yet been published and there are still a number of issues expected to be clarified during the legislative process.  

See the Capital expenditure incentives section for more information about the increased deduction for R&D costs.