Long anticipated, the Franco-Danish Tax Treaty was finally
terminated on June 10, 2008 and will be effective on January 1,
As from this date, transactions between Denmark and France
will be subject to taxes imposed respectively under Danish and
French domestic law, and therefore potentially exposed to
Apart from Danish taxation applicable to Danish source
retirement pensions received by individuals moving to France
for their retirement, this will, among other things, involve
the following significant changes as from January 1, 2009:
Termination of the tax exempt status of immovable property
situated in France:
Until now, the taxation of income derived from real estate
assets situated in France varied, depending on whether the
beneficiary was a Danish resident, individual or company.
Whereas Danish individuals were taxable in France, Danish
companies were not subject to any taxation, whether in France
or in Denmark on their income derived from real assets situated
in France (unless such immovable property was held through a
French permanent establishment held by a Danish company).
As from January 1, 2009, income derived from real estate
assets situated in France by Danish residents will be subject
to taxation in France under the standard rules applicable to
non-French residents as follows:
Progressive rate (up to 40%) if the beneficiary is a
Danish individual; and
A 33.1/3% rate if the beneficiary is a Danish
If the beneficiary is a Danish professional real estate
broker / dealer (whether an individual or a company), French
taxation will apply at the rate of 50%.
In addition, although capital gain derived by a Danish
company from the sale of French real estate assets or shares in
a real estate company is exempt from any taxation under the
current Franco- Danish Tax Treaty, capital gain recorded as
from January 1, 2009 by any Danish resident will be taxable in
France as follows:
a 33.1/3% rate will apply to capital gains realized by
Danish companies from the sale of real estate assets located
in France or shares in unlisted French real estate companies.
A reduced 16.5% rate will apply to capital gains realized
from the sale of shares in listed French real estate
The current applicable 16% rate will still apply to
capital gains realized by Danish individuals from the sale of
real estate assets located in France or the sale of shares in
unlisted French real estate companies1
Danish companies holding real estate situated in France or
shares in a real estate company should therefore consider a
sale of these assets before January 1, 2009 in order to avoid
French capital gains tax.
French withholding tax applicable to payments made between
France and Denmark.
The current Franco-Danish Tax Treaty eliminates any
withholding tax on dividends, interest or royalties paid
between France and Denmark.
As from January 1, 2009 and as long as no new tax treaty is
in place between France and Denmark, withholding tax will be
levied according to the provisions contained in French and
Danish domestic tax law respectively.
Accordingly, in addition to any applicable taxation in
Denmark, French source income received by a Danish tax resident
will be subject to the following French withholding tax:
Dividends paid by a French distributing company to a
Danish resident will be subject to a French withholding tax
at the rate of 25%, unless exempt under the parent-subsidiary
Interest from French sources paid to a Danish resident
will be subject to a withholding tax of 18%, unless exempt
under the interest and royalties directive;
Royalties paid by a French debtor to a Danish resident
will be subject to a French withholding tax at the rate of
33.1/3%, unless exempt under the interest and royalties
Payments made by a French resident in consideration for
services rendered by a Danish supplier should be subject to
the 33.1/3% withholding tax provided by Article 182 B of the
French Tax Code. However, Danish suppliers should be in
position to invoke the EU principles in order to claim for
reimbursement of such withholding tax.
The termination of the current Franco-Danish Tax Treaty
implies significant changes which should be taken into
consideration with a view to future transactions between France
1 Capital gains on listed real estate companies
realized by Danish individuals are not subject to French
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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