The beneficial owner cases

In recent years, the Danish Customs and Tax Administration (SKAT) has launched a large number of legal cases against Danish companies who have either distributed dividends or paid interest to parent companies in other EU Member States or countries with which Denmark has concluded double taxation treaties.

SKAT claims that the parent companies in question are so-called conduit companies because the amounts received, according to SKAT, have been passed on to group related entities in tax haven countries. The parent companies are consequently not the beneficial owners of the dividends or interest received, and the Danish subsidiaries should therefore have withheld tax at source in connection with such payments. As they failed to do so, SKAT is of the opinion that the Danish companies are liable for payment of the tax.

The number of cases is substantial, and the values involved are significant.

Plesner has conducted and won the ISS cases

Until now, only two of the cases – one case involving dividend tax payments and another involving interest tax payments – have been settled by the courts.

Plesner has conducted both these cases for ISS A/S, and the court gave judgment in favour of ISS in both cases, ruling that no obligation to withhold tax at source existed.

The Danish Ministry of Taxation has not appealed against the judgments, and the outcome is therefore final.

Plesner is conducting a number of test cases before the Court of Justice of the European Union

The other beneficial owner cases are pending before the Danish National Tax Tribunal or the ordinary courts.

In six of the cases before the ordinary courts, the Danish High Court has referred preliminary questions to the Court of Justice of the European Union ("CJEU").

Plesner is conducting three of these test cases – one involving dividend payments and two involving interest payments. In October 2017, we argued these cases at a hearing before the CJEU's Grand Chamber in Luxembourg and on 1 March 2018 Advocate General Kokott delivered her opinion in the 6 cases. Please find further reference here. We expect the CJEU to give its final judgment in the autumn of 2018.

In addition to these test cases, Plesner is also conducting a series of other beneficial owner cases which have been put on hold awaiting the judgment of the CJEU.

Principal questions in the beneficial owner cases

In addition to the questions referred to the CJEU – which specifically concern the interpretation of the Parent-Subsidiary Directive and the Interest and Royalties Directive and their transposition into Danish law and of the freedom of establishment of the EC Treaty – the beneficial owner cases raise a wide range of additional questions.

These questions especially concern the interpretation of the relevant double taxation treaties, the significance of SKAT’s change in practice and the issue of whether the companies have acted negligently.

For a detailed review of SKAT’s change in practice and its significance, see Hans Severin Hansen’s article "The great hypocrisy – the beneficial owner cases" in the Danish Journal for Taxes and Duties. For a more detailed review of the Danish beneficial owner cases, see Plesner's review article "Danish beneficial owner cases – a status report" in the Bulletin for International Taxation.

See also EU tax litigation

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