Danish relief-at-source regime on dividend withholding tax is expected for 2023

Danish relief-at-source regime on dividend withholding tax is expected for 2023

The Danish Tax Authorities withhold 27% tax on dividends when the dividend is distributed to foreign shareholders. The foreign shareholders can reclaim the part of the dividend tax which exceeds the rate according to the relevant double taxation agreements which is typically 15%. Applying for a refund requires the shareholder to provide the tax authorities with relevant documentation after the dividend distribution. It is an administratively heavy regime that involves the risk of errors and rejections. 

The new regime 

The new regime is a relief-at-source regime where the dividend tax is withheld at the correct rate at the time of distribution i.e. down to the tax rate according to the double taxation agreement. The new relief-at-source regime requires the foreign shareholders to be registered with the Danish tax authorities prior to the dividend payment to obtain a unique identification number, which will be used to identify the shareholder’s shares and tax rate. 

Registration must be made via the shareholder’s custodian bank and the shareholder must meet the beneficial owner requirements in relation to the shares and the dividend under Danish tax law. The declaration describes the situations in which the immediate recipient of the dividend under Danish tax rules cannot be regarded as the beneficial owner, for example for certain types of security lending. However, institutional investors, such as pension funds, that are entitled to a particularly low dividend tax rate must go through a preapproval procedure with the Danish tax authorities to obtain the low rate.

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. This means that the new regime will probably not come into effect until 2023. 

Globe Refund’s comments

This is good news in lign with the OECD TRACE relief-at-source project for a harmonization of the taxation under double tax treaties. But this not applies to the rest of the withholding tax (i.e. the 15% remaining) wrongly levied by the Danish Tax Authorities and in breach with Article 63 TFEU. This tax discrimination remains rampant in too many European countries despite the case law of the ECJ. Globe Refund can assist you in reclaiming the full withholding tax on your behalf. Our commited team will take care of the entire process without any disruption for your business and will provide you real time full transparency of the process until you will see the refund on your own account.

Contact us now for a free of charge analysis of your reclamable amounts.