New taxation model will eliminate tax fraud
The Danish Minister for Taxation recently announced a new bill to eliminate tax fraud related to refund of dividend tax. Behind the scenes VP SECURITIES and representatives from the financial industry contributed to a pragmatic and sustainable model for taxation at the source.
12.3 billion DKK has been lost as a result of fraud with the tax refunds from fictive international shareholdings in Danish companies. Just recently, the Minister for Taxation Karsten Lauritzen announced a new bill to expectantly eliminate the problem. In principal, dividend tax will be deducted at the source thus eliminating the refund process, which was key to the fraudulent activity. The new legislation draft will be put forward in the Danish Parliament in the autumn.
“The final draft of the legislation and all the details are still to be finalized, but working with the authorities and representatives from the financial industry has been a productive process,” says Birger Schmidt, Chief Commercial Officer from VP SECURITIES. “I think we have managed to come up with a model, which is realistic in terms of implementation as it does not put too many burdens on the market participants. Also very importantly it takes in to consideration, that it should still be an attractive and straight forward process for international investors to invest in Danish companies.”
Several models have been discussed, but everything indicates that a model with relief at source will be the focal point. All the tax rates from the double taxation agreements will be applied in the dividend calculation; hence, the correct tax rate will be deducted immediately. VP is ready on behalf of the industry to implement the necessary adjustments in the system and if needed develop IT solutions specifically for this new legislation and the new taxation process.
Foreign investors hold approximately half of all shares in Danish companies. By minimum system adjustments and the introduction to new operational tasks that are not so different from what is seen in other markets, we might experience that the Danish market could become more attractive to international investors due to a smooth dividend taxation process.