Denmark: Types of Company
Advantages of Holding Companies
The combination of Denmark's tax treaty network (around 80 treaties) and its holding company regime means that there have traditionally been around 35 major countries which with proper structuring could route their dividends through Denmark and not incur any withholding taxes at any stage. These countries include: Argentina, Austria, Belgium, Brazil, China, Cyprus, Finland, France, Germany, Greece, Iceland, India, Ireland, Italy, Luxembourg, Malaysia, Mexico, Netherlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, UK and Malta. In about 40 other countries withholding taxes are substantially reduced owing to the double taxation treaty network.
However, most companies can avoid such routing measures since Denmark eliminated its 10% withholding tax on January 1, 1999, in a bid to draw a bigger slice of the billions of corporate cash that moves across Europe's borders. This has proved lucrative for Denmark as corporations have set up hundreds of holding companies in the country.
A number of EU countries (namely Spain, France, Germany Austria & Italy) have imposed anti-abuse legislation in their interpretation of the Parent-Subsidiary directive aimed at European holding companies controlled by third country investors.
However Danish holding companies are well placed to counter this threat owing to the aforementioned extensive double taxation treaty network in place. In many cases, even if the corporate structure envisaged falls foul of parent-subsidiary directive anti-avoidance provisions, the existence of Danish double tax treaties can largely help to avoid this problem.