Certain types of payments to non-residents are subject to Danish withholding tax, which may be reduced according to a double taxation treaty.
Interest payments made to non-residents are generally not subject to withholding tax. But if interest is paid to controlled entities in countries with no double taxation treaty, withholding tax has to be paid at 25 %.
According to Danish law withholding tax must be paid on all royalties for the use – or the right to use – patents, trademarks, designs or models, plans, secret formulas or processes, or information concerning industrial, commercial or scientific processes. Usually, purchases of intangible assets are not subject to withholding tax, but payments for access to know-how may be deemed subject to withholding tax at 25% (subject to treaty relief). Royalty payments for the use of any copyright to literary or artistic work are not subject to Danish withholding tax.
Dividends from Danish subsidiaries can be distributed without withholding tax provided that:
protected by a double taxation treaty and
If the parent company does not satisfy the above requirements, then the Danish subsidiary must withhold tax at a rate of 27% subject to treaty relief.
The exemption requires that the Danish subsidiary can certify that the parent company meets these conditions prior to the payment on the dividend. Otherwise, the subsidiary must withhold tax, and the parent company can subsequently reclaim the withholding tax from the Danish tax authorities.
This document is provided by Addere Revision as a general overview of matters to be considered when setting up an overseas business in Denmark. It is essential to take advice on specific issues. No liability can be accepted for any action taken or not taken arising from the information provided in this publication.
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