We have previously informed about a bill proposing to introduce, inter alia, anti-avoidance rules regarding withholding tax on out-bound dividends from certain Danish holding companies. 

The bill has now been adopted and will apply to distributions made on or after 1 January 2013.

The new rule is aimed at Danish companies being used as "stepping stones" to avoid or reduce foreign withholding tax. Under the new rule, the existing exemption from Danish withholding tax on dividends paid by a Danish company to a foreign parent company no longer applies if:

  1. the dividends paid from the Danish company to the foreign parent company stem from dividends that the Danish company has received from a foreign subsidiary, and
  2. the Danish company is not the beneficial owner of the dividends received from the foreign subsidiary.

Instead, the Danish dividends will be subject to a withholding tax of 27% (or such lower rate as is provided for in the double tax treaty between Denmark and the foreign parent company jurisdiction, provided that the foreign parent company meets the beneficial owner requirement, etc. in the treaty). The withholding tax does not apply if withholding tax must be waived pursuant to Directive 90/435 EEC (the Parent/subsidiary Directive), provided the recipient qualifies as the beneficial owner of the dividends.

For any structures with Danish holding companies subject to the new rule it should urgently be considered to make distributions prior to 1 January 2013. Alternatively, it should be considered to restructure prior to 1 January 2013.

Read our previous briefing on the new rules here.