Worldwide: Draft Bill On Revised Danish List Of Non-cooperative Tax Jurisdictions Has Been Published

A draft bill on the revision of the Danish list of protective measures was published on 20 November 2023. The draft bill may have tax consequences for companies with activities in Antigua and Barbuda, Belize, or Seychelles.

Background

The EU is working on an ongoing basis to discourage the use of tax havens and to fight tax evasion and tax avoidance. One of the measures taken is to draw up a common EU list of non-cooperative jurisdictions for tax purposes (EU's blacklist).

Denmark has introduced special tax rules related to jurisdictions on the blacklist. The rules include (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 rules were implemented in Denmark with effect from 1 July 2021 and initially covered the countries listed on the EU blacklist at that time.

Read more on the new defensive measures against EU blacklist countries.

The blacklist

The EU list of non-cooperative jurisdictions for tax purposes is revised twice a year. However, the revisions are not directly enforceable under Danish law as the Danish provisions on special tax rules for blacklisted jurisdictions must first be expanded in scope by the Danish Parliament. The Danish list of non-cooperative jurisdictions for tax purposes is found in section 5H (2) of the Danish Tax Assessment Act.

On 17 October 2023, the EU Council revised the blacklist, adding Antigua and Barbuda, Belize, and Seychelles. Simultaneously, Costa Rica, British Virgin Islands, and Marshall Islands were removed from the list. The Danish Minister for Taxation proposes that this revision is implemented in Danish law with effect from 1 February 2024.

As previously described, Russia was included on the blacklist with the complication that certain defensive measures were unenforceable against Danish companies with activities in Russia, since Denmark had a tax treaty with Russia. However, the tax treaty was terminated on 13 November 2023 with effect from 1 January 2024. Non-deductibility for payments and increased withholding rates on dividends to Russia are consequently enforceable from 1 January 2024.

Danish companies with activities in the new countries on the list should consider the implications that the draft bill may have for them.

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.