TAX BENEFITS OF DANISH HOLDING COMPANIES

Denmark is now a great place for non-European Union companies to establish a holding company for overseas subsidiaries.

Effective 1 January 1999, Danish law provides the following:

  • No withholding tax is imposed on outbound dividends to foreign parent companies, provided at least 25% of the share capital of the Danish company is held for a period of 12 consecutive months.
  • No Danish tax is imposed on inbound dividends from an operating subsidiary, provided the Danish company holds at least 25% of the share capital in the dividend-paying company for a period of 12 consecutive months.
  • No capital gains tax is imposed on the sale of shares in subsidiaries, provided the shares are held for a period of at least 3 years.
  • Generally, Danish law does not impose limitations on outgoing payments of interest, cultural royalties (including software royalties), equipment rents or management fees.
  • There are no capital contribution or registration taxes.
  • Denmark has a widespread net of tax treaties.
  • The Danish corporate tax rate was recently reduced from 34% to 32%.
  • Effective 1 October 1999, the transfer tax of 0.5% on shares is abolished.

All of these factors combine to make Denmark an attractive location for foreign holding companies.

It should be noted that the favourable inbound dividends rules do not apply to dividends received from a financial company, unless the subsidiary has been subject to foreign taxation not materially more favourable than Danish taxation. A subsidiary is considered a financial company if at least one-third of its income is interest, dividends, currency gains, royalties and financial leasing income or if the market value of the financial assets of the subsidiary is at least one-third of its gross assets.

For further information, please contact Aksel H. Olsen, KPMG Copenhagen by facsimile on +45 38 18 30 51 or e-mail: Click Contact Link or visit the KPMG Denmark website at Click Contact Link

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