Denmark vs NETAPP ApS and TDC A/S, May 2021, High Court, Cases B-1980-12 and B-2173-12

« | »

On 3 May 2021, the Danish High Court ruled in two “beneficial owner” cases concerning the question of whether withholding tax must be paid on dividends distributed by Danish subsidiaries to foreign parent companies.

The first case – NETAPP Denmark ApS – concerned two dividend distributions of approx. 566 million DKK and approx. 92 million made in 2005 and 2006 by a Danish company to its parent company in Cyprus. The National Tax Court had upheld the Danish company in that the dividends were exempt from withholding tax pursuant to the Corporation Tax Act, section 2, subsection. 1, letter c, so that the company was not obliged to pay withholding tax. The Ministry of Taxation brought the case before the courts, claiming that the Danish company should include – and thus pay – withholding tax of a total of approx. 184 million kr.

The second case – TDC A/S – concerned the National Tax Tribunal’s binding answer to two questions posed by another Danish company regarding tax exemption of an intended – and later implemented – distribution of dividends in 2011 of approx. 1.05 billion DKK to the company’s parent company in Luxembourg. The National Tax Court had ruled in favor of the company in that the distribution was tax-free pursuant to section 2 (1) of the Danish Corporation Tax Act. 1, letter c, 3. pkt. The Ministry of Taxation also brought this case before the courts.

The Eastern High Court has, as the first instance, dealt with the two cases together. The European Court of Justice has ruled on a number of questions referred in the main proceedings, see Joined Cases C-116/16 and C-117/16.

In both cases, the Ministry of Taxation stated in general that the parent companies in question were so-called “flow-through companies” that were not real recipients of the dividends, and that the real recipients (beneficial owners) were in countries that were not covered by the EU parent / subsidiary directive.

in the first case – NETAPP Denmark ApS – the High Court upheld the company’s position that the dividend distribution in 2005 of approx. 566 million did not trigger withholding tax, as the company had proved that the distribution had been redistributed from the Cypriot parent company, which had to be considered a “flow-through company”, to – ultimately – the group’s American parent company. The High Court stated, among other things, that according to the Danish-American double taxation agreement, it would have been possible to distribute the dividend directly from the Danish company to the American company, without this having triggered Danish taxation. As far as the distribution in 2006 of approx. 92 million On the other hand, the High Court found that it had not been proven that the dividend had been transferred to the group’s American parent company.

In the second case – TDC A/S – the High Court stated, among other things, that in the specific case there was no further documentation of the financial and business conditions in the group, and the High Court found that it had to be assumed that the dividend was merely channeled through the Luxembourg parent company. on to a number of private equity funds based in countries that were not covered by tax exemption rules, ie. partly the parent / subsidiary directive, partly a double taxation agreement with Denmark. On that basis, the Danish company could not claim tax exemption under the Directive or the double taxation agreement with Luxembourg, and the dividend was therefore not tax-exempt.


Click here for English translation


DK beneficial Owner HC 3 May 2021-b198012-og-b217312


Leave a Reply

Your email address will not be published. Required fields are marked *