European Holding Companies

Denmark Holding Company Information

» Danish Holding Company Overview
» Denmark Key Elements

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Denmark Holding Company Overview


Definition

The Danish Holding Company is an ordinary company which falls within the scope of general tax law and may benefit from the double taxation treaties concluded by Denmark and the European tax directives.
There are no limitations on the activities of the company.

Legal Form

A Danish Holding Company can be constituted as
an “Anpartselskab” (private limited company- ApS) or
an “Aktieselskab” (public company- A/S).

Formation

The minimum share capital for incorporation of a Danish company is

DKK500,000 for an “A/S”

DKK125,000 for an “ApS”

or the equivalent in other currency which must be fully paid up. While for a company incorporated as an « A/S » may hold up to 10% of its own shares, an “ApS” is not allowed to own shares in itself.


Taxation

Resident and non-resident companies are taxed at a rate of 25% effective for the income year 2007, previously 28%
A company is deemed resident if it is managed and controlled in Denmark. Resident companies are taxed on their worldwide income.
A tax credit is available for foreign taxes paid. Under the treaty, tax relief may be granted by the application of the exemption method.
A 1% capital duty is applied to the par value of issued shares.

Income

The taxable income of a Danish Company is based on the annual financial statements prepared in accordance with generally accepted accounting principles subject to adjustments and provisions.
Expenses incurred exclusively for the purposes of the business (including interest and royalty payments and foreign exchange losses) are deductible while others including formation expenses are not deductible.

» Dividends Exemption

Dividends received by a Danish Company from its Danish or foreign subsidiary are exempt from tax.

A company is considered to be a subsidiary if the parent company:

1. holds at least 15% of the share capital of the subsidiary for a period of one year and the company is located in a state with which Denmark has a tax treaty (it is proposed to reduce the threshold to 10% from 2009)

2. The Danish Company holds more than 50% of the shares/voting rights in the subsidiary, for a period of 12 consecutive months if shares were held during the 2 previous years

The 12 months period may be fulfilled after the distribution. Such an exemption is not available for income received from low tax countries. The 12 months condition may be fulfilled after the payment date.
For dividends received from companies that do not qualify as subsidiaries, only 66% of the dividends are included in the taxable profit and taxed at a rate of 25%.

Generally, dividends received from Controlled Foreign Corporation (CFCs) are exempt from tax if the 12 months shareholding by the Danish Company is respected.

» Capital Gains Exemption

Gains derived from the disposal of shares owned for at least 3 years are generally exempt from tax, unless the seller deals in shares. For shares from subsidiaries in low tax countries, capital gains are exempt from tax if the parent company owns at least 25% of the shares in the subsidiary for the 3 years period preceding the sale.

» Interest and Royalties

See income above.

Some Advantages of the Danish Holding Company

Besides the common advantages of a holding company, the Danish Holding Company may also enjoy from the following:

» Exemption from Withholding Tax on Payment of Dividends

There is no withholding tax on dividend distribution from a Danish Company to a foreign parent company providing that:

The foreign parent company holds 15% of the share capital of the Danish company for at least one year during which the dividend is distributed

The foreign parent is located in a country with which Denmark has a tax treaty.

It is proposed to reduce the threshold to 10% from 2009.

» Exemption from Withholding Tax on Payment of Interest

Payments of interest made by a Danish Company to others than individuals that had been residents in Denmark for 5 of the previous 10 years are not subject to withholding tax.

» Exemption from Withholding Tax on Payment of Royalties

Royalties paid by a Danish Company for copyrights of literary, artistic or scientific works and for the right of use of industrial, commercial or scientific equipment are not subject to withholding tax. Withholding tax for other royalties and interest is at 28% or the rate agreed upon in the double tax treaty, if applicable.

Denmark Key Elements

	Formation
	Legal Form:		Private limited company (ApS); Public company (A/S)
	Minimum Subscribed Capital:		DKK500,000 (A/S) DKK125,000 (ApS)
	Minimum Paid-Up Capital:		DKK500,000 (A/S) DKK125,000 (ApS)
	Number of Shareholders:		1 founder (A/S) 1 founder (ApS)
	Type of Shares:		Registered or bearer (A/S) Registered (ApS)
	Substance Requirements:		Nil
	Taxation
	Capital Duty:		1%
	Net Worth Tax:		0%
	Corporate Income Tax:		25%
	Double Tax Treaties:		80
	Dividends Exemption:		100%
	Holding Requirements:		15% and 1 year
	Capital Gains Exemption:		Yes
	Holding Requirements:		3 years
	Tax Credit:		Yes
	Relief of Losses:		Carry forward indefinitely
	CFC Rules:		Yes
	Debt-to-Equity Ratio:		4:1
	Withholding Taxes
	Dividends:		EU Parent Co- 0%5 Treaty Countries- 0%5 Others- 0% 5or 25%
	Interest:		EU Parent Co- 0%6 Treaty Countries- 0%6 Others- 0%6
	Royalties:		EU Parent Co- 0%8 Treaty Countries- 0%-20%8 Others- 28%8
	Liquidation:		Nil

	Web
Double Tax Treaties	39KB

⁵ The parent company must own 15% of the shares for a period of 1 year.
⁶ If the recipient is not an individual resident in Denmark for 5 of the preceding 10 years
⁸ A 0% rate is levied on payments of copyrights or for the use of industrial, commercial or scientific equipment.

Disclaimer

Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other professional advice. OCRA Worldwide does not accept any responsibility, legal or otherwise, for any errors or omission.