27 Apr 2006 - Danish holding companies
MONACO CORPORATE SECRETARIAT
International tax planning
Protecting your assets tax efficiently
Danish holding companies
The Danish holding company tax regime for the taxation of income and capital gains from subsidiaries of Danish companies was introduced in 1999 and is based on three factors :
- the need to implement the E.U. parent ? subsidiary directive on the elimination of withholding taxes
- the Danish network of eighty five tax treaties
- the lack of resources in a small country to effectively tax the subsidiary companies of the few Danish multi-national companies.
This has resulted in a holding company tax regime for those companies that have subsidiaries that are actually trading, that is most favourable for an onshore high tax country, resulting in firstly the elimination of all taxation at holding company level on the dividends and capital gains arising from the trading subsidiary (provided certain rules are followed) and the ability for the holding company to pay out dividends to a corporate entity (incorporated in the EU or a country with a tax treaty with Denmark) free of any withholding taxes.
Taxation
Under the Danish holding company tax regime a Danish company will :
- not pay Danish tax on the dividend income arising from a subsidiary providing that :
- the Danish company has held at least 20% (15% from 2007 and 10% from 2009) of the capital of the subsidiary for at least one year
- the subsidiary company can not be a low taxed financial company (i.e. it must trade)
- not pay Danish tax on any capital gains arising from a subsidiary providing that :
- the Danish company has held the shares for at least three years
- the subsidiary company can not be a low taxed financial company (i.e. it must trade)
- not pay Danish withholding tax on payment of a dividend from itself to a non Danish resident parent providing that :
- the parent is a company (not trust or individual(unless Swiss resident)), resident within the EC or in a tax treaty country
- the parent must have held 20% of the shares in the Danish company for at least one year
Low taxed financial companies
- at least one third of the gross income is financial income, or
- at least one third of the gross assets are financial assets, and
- the company suffers a tax rate significantly lower than what a resident Danish company would if it earned the same sort of financial income (generally financial income in Denmark is taxed at 28% p.a., a significantly lower tax rate is considered to be 21% or less p.a.)
Financial income: dividends, interest, royalties, income arising from real estate, insurance premiums, lease premiums and the profits arising from the sale of financial assets.
Advantages
- It is possible to repatriate profits to offshore tax havens or any non-resident individual without any tax consequences in Denmark by way of liquidation distributions or payment of interest and repayment of loans.
- Dividends paid by the Danish company to its parent, covered by the EU Parent/Subsidiary directive, or a double tax treaty is subject to 0% withholding tax, provided that the parent company owns at least 20% of the Danish company for at least 12 months. This is interesting as the extensive double taxation treaty network includes jurisdictions, where it is possible to further forward the proceeds offshore with no or low tax.
- Denmark is an excellent jurisdiction for royalty employment companies
For further information
Please contact :
Derek R. SMITH of M.C.S
Email: assetprotect@libello.com
Tel +377 9797 6230
Fax +377 9797 6233
International tax planning
Protecting your assets tax efficiently
Danish holding companies
The Danish holding company tax regime for the taxation of income and capital gains from subsidiaries of Danish companies was introduced in 1999 and is based on three factors :
- the need to implement the E.U. parent ? subsidiary directive on the elimination of withholding taxes
- the Danish network of eighty five tax treaties
- the lack of resources in a small country to effectively tax the subsidiary companies of the few Danish multi-national companies.
This has resulted in a holding company tax regime for those companies that have subsidiaries that are actually trading, that is most favourable for an onshore high tax country, resulting in firstly the elimination of all taxation at holding company level on the dividends and capital gains arising from the trading subsidiary (provided certain rules are followed) and the ability for the holding company to pay out dividends to a corporate entity (incorporated in the EU or a country with a tax treaty with Denmark) free of any withholding taxes.
Taxation
Under the Danish holding company tax regime a Danish company will :
- not pay Danish tax on the dividend income arising from a subsidiary providing that :
- the Danish company has held at least 20% (15% from 2007 and 10% from 2009) of the capital of the subsidiary for at least one year
- the subsidiary company can not be a low taxed financial company (i.e. it must trade)
- not pay Danish tax on any capital gains arising from a subsidiary providing that :
- the Danish company has held the shares for at least three years
- the subsidiary company can not be a low taxed financial company (i.e. it must trade)
- not pay Danish withholding tax on payment of a dividend from itself to a non Danish resident parent providing that :
- the parent is a company (not trust or individual(unless Swiss resident)), resident within the EC or in a tax treaty country
- the parent must have held 20% of the shares in the Danish company for at least one year
Low taxed financial companies
- at least one third of the gross income is financial income, or
- at least one third of the gross assets are financial assets, and
- the company suffers a tax rate significantly lower than what a resident Danish company would if it earned the same sort of financial income (generally financial income in Denmark is taxed at 28% p.a., a significantly lower tax rate is considered to be 21% or less p.a.)
Financial income: dividends, interest, royalties, income arising from real estate, insurance premiums, lease premiums and the profits arising from the sale of financial assets.
Advantages
- It is possible to repatriate profits to offshore tax havens or any non-resident individual without any tax consequences in Denmark by way of liquidation distributions or payment of interest and repayment of loans.
- Dividends paid by the Danish company to its parent, covered by the EU Parent/Subsidiary directive, or a double tax treaty is subject to 0% withholding tax, provided that the parent company owns at least 20% of the Danish company for at least 12 months. This is interesting as the extensive double taxation treaty network includes jurisdictions, where it is possible to further forward the proceeds offshore with no or low tax.
- Denmark is an excellent jurisdiction for royalty employment companies
For further information
Please contact :
Derek R. SMITH of M.C.S
Email: assetprotect@libello.com
Tel +377 9797 6230
Fax +377 9797 6233