On 20 April 2023, the Danish Minister for Taxation published a draft bill allowing the Danish Government to terminate the tax treaty between Denmark and Russia. Companies with activities in Russia should consider the tax implications of such termination. Read more below.
On 20 April 2023, the Danish Minister for Taxation published a draft bill allowing the Danish Government to terminate the tax treaty between Denmark and Russia. Any such termination, however, cannot take effect until 1 January 2024 at the earliest.
The background for the draft bill published is the inclusion of Russia on the EU list of non-cooperative jurisdictions for tax purposes. Termination of the tax treaty between Denmark and Russia will make it possible for Denmark to apply certain defensive measures against Russia.
Conditional on lawful termination of the tax treaty with Russia before 30 June 2023, Denmark is planning to add Russia to the Danish list of non-cooperative jurisdictions with effect from 1 January 2024.
Read more: More jurisdictions added to EU's blacklist | Kromann Reumert
The tax consequences of being on the Danish list includes rules on (i) non-deductibility in Denmark for payments to related entities that are resident (or registered) for tax purposes in a blacklisted jurisdiction, and (ii) increased withholding tax rates on dividends distributed to recipients that are resident (or registered) for tax purposes in such jurisdictions.
The Danish Government further intends to consult the other EU Member States to adopt a common approach to the issue of termination of tax treaties with Russia.
Originally published 25 April, 2023
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