The Danish government's bills on tax for 2023/2024

On 3 October 2023, the opening day of the Danish Parliament, the Danish Government presented the planned bills for 2023/2024. The following are key points of some of the legislative proposals relating to tax.

This proposal has several different implications, and thus only the most significant parts will be emphasized. 

Tax on shares registered at a multilateral trading facility
For private individuals it is proposed that shares admitted to trading on a multilateral trading facility (such as First North) shall be taxed as listed shares instead of unlisted shares. The amendment is proposed to enter into force 1 January 2024. 

The amendment entails that loss on such shares will no longer be possible to offset against other income in general, but only against gains and dividends from other listed shares. Furthermore, being treated as listed shares also entails that it is a condition for the deduction of a loss that the acquisition is reported to the Danish Tax Agency before the expiry of the deadline for filing tax return for the income year in which the shares are acquired. 

Shares sold back to the issuing company
When private individuals choose to sell their shares admitted to trading on a multilateral trading facility back to the issuing company, the sales price will no longer be taxed as dividend. Going forward, the sales price will in most cases be taxed as capital gain on shares whereas the purchase price can be deducted when calculating the taxable profit/loss. 

Disclosure of liquidation proceeds
An obligation to disclose each shareholder's portion of liquidation proceeds is introduced for Danish companies. 

Deductibility of salary expenses between group companies
The deductibility of salary expenses paid between group companies as arm's length remuneration will no longer be dependent on the companies being part of a joint taxation. It is sufficient that the companies qualify for opting for international joint taxation. A possibility of reopening previous income years will be introduced. 

Expanding the possibility for foreign companies to receive tax-exempt dividends from Danish companies
As of now the possibility for foreign companies to receive tax-exempt dividends from Denmark requires that the receiving foreign company must be comprised by the Parent-Subsidiary Directive (2011/96/EU) or a double taxation treaty which lowers or prohibits the taxation of dividend for Denmark. 

With the suggested changes, also companies which are resident in the Faroe Islands, Greenland or a state that is a member of the EU, where it is the participants in the dividend-receiving company and not the company itself that are subject to the taxation of the dividend may receive tax-exempt dividends. However, certain criteria must be met. Upon dividend distribution in these cases, 27 % withholding tax must still be withheld but the withholding tax can be reclaimed. The purpose of this part of the bill is to ensure freedom of establishment under EU law.