Beneficial Ownership

The notion of "beneficial owner" has in recent years been intensely debated in Denmark. A judgement from the High Court provides some clarification, but important questions remain unresolved.

"Beneficial owner" in Danish tax law The term "beneficial owner" does not have an equivalent in Danish law, and until recently the Danish tax authorities did not seem to have looked into whether a recipient of dividends and interest from sources in Denmark was also the "beneficial owner".

Recently, however, the Danish tax authorities investigated more than 100 structures (primarily private equity and industry structures) and initiated more than 20 court cases against companies claiming more than 5 billion DKK focusing specifically on conduit companies, meaning intermediary companies which formally receive payments for their own benefit, but in reality for the benefit of other companies.

In December 2011 the High Court of Eastern Denmark delivered the first Danish judgement involving the notion of "beneficial ownership". The facts of the case were particular in that the parent company in Luxembourg did not pass on dividend to its parent company, or to the shareholders of the parent company, but instead lent it to its Danish subsidiary. The High Court ruled that, in these circumstances, the parent company in Luxembourg should not be regarded as a conduit company, but as the "beneficial owner" of the dividend. Consequently, the Luxembourg parent company was entitled to the zero rate of withholding tax provided for under the Danish participation...