Refund of Danish dividend tax

Foreign portfolio shareholders often need external assistance in order to obtain a dividend tax refund from the Danish tax authorities following the double taxation treaties, etc.

In recent years, the Danish tax authorities have tightened their practice and documentation requirements for a reclaim significantly as a consequence of a big dividend scandal where foreign shareholders have wrongfully received a refund of more than DKK 12 billion from the Danish state.

For example the documentation practice has been tightened in relation to beneficial ownership and to shares not having been lent or borrowed by a third party at or close to the dividend date. This means that it has become much more difficult to receive a dividend tax refund and that the Danish tax authorities’ processing time has been extended.

Dividend tax

In general, a dividend tax of 27% is withheld in connection with the distribution of dividends from Danish companies. Following a double taxation treaty, foreign shareholders may be able to obtain a reduced tax rate, typically 15%. In certain cases, the dividend tax for company shareholders may be reclaimed down to a tax rate of 22% without a double taxation treaty. The remaining part must subsequently be reclaimed from the Danish tax authorities.

Foreign pension funds and other types of shareholders have the opportunity in certain circumstances to reclaim the entire dividend tax down to a tax rate of 0% following the double taxation treaty. Foreign investment funds, etc., whether they are domiciled in the EU or in third countries also have the opportunity to reclaim the entire Danish refund tax based on the EU Treaty’s provisions on the free movement of capital (so-called “Fokus Bank Claims”).

Time limitation

The request for a refund of Danish dividend tax must typically be filed within three years from the distributing company’s decision to distribute the dividend. In some cases, the dividend tax may be reclaimed in up to 10 years.

PwC Denmark is able to assist you

We have extensive experience and expertise in claiming a refund of dividend tax from the Danish tax authorities for both companies and individuals in all phases of the reclaiming process, including the collection of information, filing of the request and subsequent follow-up with the Danish tax authorities.