CORPORATE TAXES
GROUP TAXATION
A Danish corporation having one or more wholly owned subsidiaries, either domestic or foreign, may obtain permission to be taxed jointly with such subsidiary or subsidiaries on a combined-income basis, provided certain conditions are fulfilled. From January 1,1995 the rules governing group taxation were changed. These rules include adjusted opening values for foreign companies and exit taxation when a company leaves the group. Further, Parliament approved New rules in mid-1996, effective from December 6, 1995, that put further restricions on international gorup taxation.
All taxable entities that are part of an international group are subject to the legislation regarding transfer pricing. Companies with an income year commencing from January 1,1998 onward are obliged to disclose certain information regarding type and volume of intragroup transactions in the annual tax return. From 1999, companies are obliged to maintain proper
documentation substantiating the fact that intragroup trading and financing are conducted in accordance with arm's-length principles.
INCENTIVES
The incentives mentioned below are the most important, but many other categories of state subsidies of minor interest are available. As a general rule, the subsidies must be applied for, and the amounts received are normally taxable income.
Inward investment/Certain concessions are granted to companies that establish industrial or other business enterprises in areas that have been designated development areas. These concessions consist mainly of long-term Danish state loans at a low rate of interest and, in certain undeveloped areas, state subventions.
Capital investment/For business enterprises established in certain development areas, depreciation allowances on fixed assets, including buildings, are granted, with rates up to a maximum of twice the normal rate listed above.
Other incentives/Favorable credit facilities in the form of seven-year loans at a low rate of interest are available from the Danish Ship Credit Fund on completed vessels built at Danish shipyards.
WITHHOLDING TAXES
On payments to foreign corporations and nonresident aliens/There are no withholding taxes on payments of interest or on stock dividends.
A 30% withholding tax is levied on royalties paid from Denmark to a recipient abroad. However, in many double taxation treaties Denmark has wholly or partly waived the right to tax royalties from sources in Denmark. The withholding tax rate can be reduced to the rate stipulated in the double taxation treaty with the country in which the recipient is resident. The royalties tax applies to industrial royalties and licenses but not to artisitc royalties or leasing payments.
With effect from corporate financial years beginning January 1,1999 or later there will be no Danish withholding tax on dividends paid by Danish companies to their foreign parent companies (at least 25% shareholding), regardless of where such parent companies are resident. If the shareholdingqualification is not ment, the withholding tax rate for cash dividends declared by a domestic corporation is 2.5%.
Foreign recipients must file a special certificate to have the withholding rate decreased to any lower rate afforded by virtue of a double taxation treaty or to obtain refund of an excess withholding.
DIVIDENDS TAX LIMITED TO:
RECIPIENT TREATY TYPE QUALIFYING COMPANIES OTHERS (NOTE 1) % (NOTE 2) %
Resident corporations… Nil (b) 25
Resident individuals…… 25 (a) 25
Notereaty:
Nonresident corporations…… Nil (b) 25
Nonresident individuals……… 25 (a) 25
Treaty:
Argentina……………C/e Nil (b) 15
Australia……………C/e
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