Yesterday, the Danish Tax Authorities announced that, on 24 August 2015, they filed a report with the Danish Public Prosecutor for Serious Economic Crime on suspected tax fraud amounting to approx. DKK 6.2bn (approx. EUR 0.8bn).
The report filed was based on information received from undisclosed foreign tax authorities in July and early August indicating that approx. 2,123 dividend withholding tax reclaims covering the period 2012- 2015 were fraudulent.
The preliminary investigation conducted by the Tax Authorities shows that the tax fraud presumably involves businesses reclaiming withholding tax on dividends on Danish shares which such businesses untruthfully and fictitiously claimed to own. Allegedly, the documentation provided to the Tax Authorities as a basis for the said reclaims was falsified, but the factual circumstances so far disclosed are very scarce.
Due to the ongoing investigation, the Tax Authorities have temporarily suspended all processing of reclaims of withholding tax on dividends.
However, the Tax Authorities expect that the approx. 6,000 reclaim cases which have currently been filed with the Tax Authorities will ultimately be processed within six months.
Not surprisingly, the announcement has triggered significant political astonishment and a call for action. We therefore anticipate that all cases of reclaiming withholding tax on dividends as well as the legal basis for such reclaims will be subject to detailed scrutiny by the Tax Authorities.
Furthermore, it is likely that the Tax Authorities will amend the documentation requirements, all of which may in turn prolong and complicate the dividend withholding tax reclaim procedure.