Denmark

WHTs on payments to foreign corporations and non-resident aliens

Dividends

Dividends paid to a parent company in another EU member state or a state with which Denmark has a DTT are exempt from WHT, provided that the shares qualify as subsidiary shares (and the taxation should be reduced or eliminated according to the DTT or EU Parent-Subsidiary Directive). This implies that the parent company must be able to claim benefits under the applicable DTT or the EU Parent-Subsidiary Directive. The same applies for dividends paid on group shares (that are not also subsidiary shares, i.e. holdings below 10%), provided that the recipient company is resident within the EU/EEA. It is a requirement for entitlement to benefits under the DTT or EU Parent-Subsidiary Directive that the recipient company is the beneficial owner of the dividend.

Further, a dividend may not be exempt from WHT if the dividend is a redistribution of tax-exempt dividends that the Danish company has received from a foreign subsidiary where the Danish company cannot be regarded as the beneficial owner.

As of 1 July, 2016, the tax rate on dividends distributed from a Danish company to foreign corporate shareholders is 22%. For dividends distributed from Danish companies to shareholders situated in the EU/EEA, the tax rate has been reduced retrospectively and applies to dividends distributed on 1 January, 2007 or later. For the income years 2007 to 2013, the applicable tax rate was 25%; for the income year 2014, it was 24.5%; and for the income year 2015, it was 23.5%. It should be noted that the WHT rate has not been reduced, but remains at 27%. The shareholders must reclaim the difference between the higher WHT rate and the lower tax rate. Specific transitional rules apply.

If the portfolio shareholder (shareholding below 10%) is situated in a country with which Denmark has a tax information exchange agreement (TIEA), the tax rate on the dividend is reduced to, e.g., 15%, and the difference between the higher WHT rate (27%) and the lower WHT rate may be reclaimed. However, the reduced rate does not apply if the shareholder is resident outside the European Union and together with related entities owns more than 10% of the capital in the Danish distributing company.

Interest

Interest is generally not subject to WHT unless paid to a foreign group member company that is tax resident outside the European Union and outside any of the states with which Denmark has concluded a tax treaty. In this situation, interest WHT is levied at 22%. Certain other exemptions apply, mainly relating to CFC taxation.

For recipients resident in countries within the European Union with which Denmark does not have a tax treaty, it is a condition that the paying company and the recipient company are associated as defined in the EU Interest/Royalty Directive.

It is a requirement for WHT exemption that the recipient of the inter-company interest payment is able to claim benefits under the applicable DTT or the EU Interest/Royalty Directive. It is a requirement for entitlement to benefits under the DTT or EU Interest/Royalty Directive that the recipient company is the beneficial owner of the interest income.

Royalties

Royalties are subject to a 22% WHT. In most cases, the WHT rate can be reduced in accordance with the tax treaty applicable to the payee. Also, the EU Interest/Royalty Directive may provide an exemption from WHT if the paying company and the recipient company are associated as defined in the EU Interest/Royalty Directive.

It is a requirement for WHT exemption that the recipient of the royalty payment is able to claim benefits under the applicable DTT or the EU Interest/Royalty Directive. It is a requirement for entitlement to benefits under the DTT or EU Interest/Royalty Directive that the recipient company is the beneficial owner of the royalty income.

Treaty WHT rates

Notes

1. Denmark does not operate a system of WHT on dividends when the parent company holds:
   1. at least 10% of the share capital of the distributing Danish company, provided the receiving company is resident in a EU/EEA member state or a state with which Denmark has entered into an agreement on exchange of information, and that the parent company is subject to tax without exemption in that state (subsidiary shares), and that Denmark is obligated to reduce or waive taxation according to the Parent/Subsidiary Directive or a DTT, or
   2. less than 10% of the share capital in the distributing company, provided the receiving company is an EU/EEA-resident, the distributing and the receiving company are affiliated companies (group shares), and that Denmark would have been obligated to reduce or waive taxation according to the Parent/Subsidiary Directive or a DTT.
2. Interest is generally not subject to WHT unless paid to a foreign group member company that is tax resident outside of the European Union and outside of any of the states with which Denmark has concluded a tax treaty. In this situation, interest WHT is levied at 22% for interest accrued or paid on 1 March, 2015 or later (25% for interest that is accrued or paid before 1 March, 2015), subject to reduction to the WHT rate stated in an applicable tax treaty (not reflected in the above overview).
3. Exemptions apply if the receiving company is directly or indirectly controlled by a Danish parent company or if the receiving company is controlled by a company resident in a state with which Denmark has a double tax convention and that company may be subject to CFC taxation. Finally, an exemption applies if the receiving company establishes that the foreign taxation of interest is not less than three-quarters of the Danish corporate taxation and that the interest is not paid to another foreign company subject to taxation that is less than three-quarters of the Danish corporate taxation.
4. Denmark has terminated its treaty with Spain with effect from 1 January, 2009. The termination means that each country will tax the relevant income according to its domestic tax rules. New treaties are not expected to be agreed in the near future. Companies in Spain receiving dividends, interest or royalty payments  from a Danish company may - depending on the specific circumstances - qualify for tax exemption on these types of income due to the EU Parent-Subsidiary Directive and the EU Interest and Royalties Directive. This qualification is grounded in the membership of both Denmark and Spain as EU member states.
5. Denmark has adopted a DTT with France applying from the beginning of the calendar year following the ratification of the treaty by both countries. France has yet to ratify the treaty. Both Denmark and France have ratified the DTT in 2023, making the treaty effective from 1 January 2024.
6. The EU Interest/Royalty Directive may provide an exemption from WHT if the payee is an immediate parent, sister, or subsidiary company resident in the European Union.
7. Serbia has succeeded in the treaty between Denmark and Yugoslavia.
8. Different rates apply depending on the characteristics of the assets on which royalty is paid.
9. The 10% rate is applicable for royalties, whereas the 5% rate is applicable to fees for technical support.
10. The WHT rate is 25% for interest and royalties that are accrued or paid before 1 March, 2015.
11. As of 1 July, 2016, the tax rate on dividends distributed from a Danish company to foreign corporate shareholders is 22%. For dividends distributed from Danish companies to shareholders situated in the EU/EEA, the tax rate has been reduced retrospectively and applies to dividends distributed on 1 January, 2007 or later. For the income years 2007 to 2013, the applicable tax rate is 25%; for the income year 2014, it is 24.5%; and for the income year 2015, it is 23.5%. It should be noted that the WHT rate has not been reduced but remains 27%. The shareholders must reclaim the difference between the higher WHT rate and the lower tax rate. Specific transitional rules apply. If the portfolio shareholder is situated in a country with which Denmark has a TIEA, the tax rate on the dividend is reduced to 15% and the difference between the higher WHT rate and the lower WHT rate may be reclaimed. However, the reduced rate does not apply if the shareholder is resident outside the European Union and together with related entities owns more than 10% of the capital in the Danish distributing company.
12. According to the tax treaty with Azerbaijan, it is a requirement for the 5% WHT rate to apply on dividend payments that the parent company holds at least 20% of the shares in the subsidiary, and that the investment in the subsidiary amounts to EUR 1 million (or a corresponding amount in a different currency). With respect to royalties, the reduced WHT rates apply if the royalty is payment for the use of a patent (licence), design, secret formula, etc., or information about industrial, commercial, or scientific experiences.
13. The 5% WHT rate applies if the parent company holds at least 10% of the shares in the subsidiary, or if the parent company is an institutional investor (specific types of institutional investors are mentioned in the treaty). In any other case, the 15% WHT rate applies.
14. According to the tax treaty with Armenia, it is a requirement for:
    1.  The 0% WHT rate to apply on dividend payments that the beneficial owner (a company) holds at least 50% of the shares in the subsidiary, and that the investment in the subsidiary amounts to EUR 2 million (or corresponding amount in Danish or Armenian currency) in the subsidiary who distribute the dividend.
    2. The 5% WHT rate to apply on dividend payments that the beneficial owner (a company) holds at least 10% of the shares in the distributing company, and that the investment in the company amounts to EUR 100,000 (or corresponding amount in Danish or Armenian currency) in the subsidiary who distribute the dividend.
15. Denmark has ratified the treaty. Algeria has not yet ratified the treaty. If Algeria ratifies the treaty during 2024, the treaty could take effect from 1 January, 2025.

Increase in tax rates and WHT rates on dividends distributed to recipients in countries and territories on the EU blacklist of tax havens

Persons and companies, etc. who are tax resident in one of the countries and territories on the EU blacklist of tax havens, and who are subject to limited tax liability on dividends, etc. of major shareholder shares, subsidiary shares, or group company shares, must pay a final gross tax of 44% of such dividends if the person or company in question is the beneficial owner of the dividends.

The blacklist currently includes the following countries and territories:

• American Samoa
• Anguilla
• Antigua and Barbuda
• Bahamas
• Belize
• Fiji
• Guam
• Palau
• Panama
• Russia
• Samoa
• Trinidad and Tobago 
• Turks and Caicos Islands
• US Virgin Islands
• Vanuatu

The measures came into effect 17 October, 2023.

The obligation for a dividend-paying company to withhold a 44% WHT on dividends on major shareholders’ shares, subsidiary shares, and group company shares will apply in all cases where:

• The recipient of the dividend is either resident for tax purposes or registered under the rules of one of the countries covered.
• A shareholder is either an independent tax subject or transparent entity.
• A shareholder is a company in a country that has concluded a DTT with Denmark if the shareholder is not the beneficial owner and the dividend is passed on to an associated party in one of the countries covered (cf. the above list).

This rule will not apply (but the general rules on WHT on dividends would be applicable) if it is demonstrated that the beneficial owner of the dividend is tax resident in an EU or EEA member state or in a country that has entered into a DTT with Denmark. This will include cases where a legal entity is registered in one of the countries covered by the EU blacklist of tax havens, but is tax resident in an EU or EEA member state or in a country that has a DTT with Denmark. In addition, it will cover cases where a dividend is received by a shareholder resident in one of the EU blacklisted countries but transferred to a physical or a legal person who is the beneficial owner of the dividend and who is tax resident in an EU or EEA member state or in a country that has entered into a DTT with Denmark.