Denmark – Withholding tax on dividends distributed to investment funds
November 12: Danish companies subject to Danish corporate income tax generally must withhold tax at a rate of 27% on dividend distributions, but the rate of the withholding tax may be reduced to 15% when dividends are distributed to Danish domiciled investments funds that are known as “IMBs” (i.e., investment companies or investment institutes with minimum taxation).
Further, Danish resident investment funds that have elected IMB status are eligible for an exemption certificate, and a Danish IMB holding an exemption certificate is effectively exempt from tax at the fund level (i.e., no withholding tax applies on dividends distributed to such IMBs).
There is a question as to whether non-Danish investment funds may be regarded as investment companies for Danish purposes and may elect the status of an IMB for Danish tax purposes.
Foreign investment funds may be eligible for reductions of the rates of withholding tax under applicable income tax treaties. Query whether two investment entities that are completely similar for Danish tax purposes would be subject to different tax treatment with respect to Danish dividends solely on the basis of their nationality?
