Danish Revenue Acknowledges Defeat In Beneficial Owner Battle

Further to the High Court judgment in the "ISS matter" regarding Danish dividend withholding tax and beneficial ownership, the Danish Ministry of Taxation has just issued a statement confirming that the Ministry will not be appealing the judgment. The High Court confirmed in the ISS judgment that a Luxembourg holding company receiving dividends from its Danish subsidiary was the beneficial owner of the dividends and therefore entitled to the zero rate of withholding tax provided for under the Danish participation exemption regime.

See our briefing on the High Court judgment

MINISTRY STATEMENT

Following the Ministry's defeat in the High Court, the Ministry was quick to state in the press that the new judgment does not set a general precedent for the 15-20 other pending Danish beneficial owner matters regarding cross-border dividends and/or interest payments made by Danish companies, since in the ISS matter the dividends never left Luxembourg, but returned to the Danish subsidiary in the form of a loan from the Luxembourg holding company and the Ministry regards this as decisive for the High Court's judgment.

Following up on these considerations, the Ministry has now confirmed in a statement dated 13 February 2012 that it will not be appealing against the High Court judgment:

"[...]

The Ministry of Taxation has decided not to appeal the decision concerning the Danish company.

The Ministry considers it a clear judgment, and one that is based to a substantial degree on specific facts. According to the High Court, it is a precondition for the denying of benefits of a tax treay "that the dividend has been, or is at least certainly intended to be, passed on" to...