Tax Treaty Relief in Denmark

Denmark has built one of the more comprehensive double-taxation agreement (DTA) networks in Europe over the past six decades. Understanding how those agreements interact with domestic rules, EU directives, and the OECD Multilateral Instrument matters for cross-border investors, expatriates, and businesses with Danish-source income.

How large is Denmark's DTA network, and which method does it use?

Denmark is party to more than 80 bilateral double-taxation agreements, covering all major EU economies, the UK, the United States, Canada, Australia, Japan, China, India, Singapore, Brazil, and a wide spread of African, Middle Eastern, and Latin American jurisdictions. [1] Agreements follow the OECD Model Tax Convention, administered by Skattestyrelsen (the Danish Tax Agency).

The credit method is Denmark's primary mechanism for relieving double taxation. A Danish-resident individual or company that has paid foreign tax on foreign-source income may credit that foreign tax against their Danish liability, up to the Danish tax that would have applied to the same income. Unused credits cannot be refunded, carried back, or carried forward to future years. [2] A minority of older agreements use the exemption method, under which qualifying foreign income is excluded from the Danish tax base while still being included in the calculation of the marginal rate applied to other income.

What happened to the France and Spain treaties?

Denmark terminated both the France-Denmark and the Spain-Denmark agreements effective 1 January 2009. The principal dispute in each case concerned Danish private pensions: retirees who had moved to France or Spain and drawn Danish-source pensions were being taxed only in their new country of residence, even though the pension contributions had generated Danish tax deductions. Denmark's position was that the source state should retain taxing rights proportionate to those deductions. [3]

The France-Denmark situation was resolved after roughly 14 years of negotiation. A new agreement was signed on 4 February 2022, ratified by the Danish Parliament in March 2023, and adopted by the French Parliament on 13 December 2023. It entered into force on 1 January 2024 and applies to income arising from that date. The new treaty generally follows the 2017 OECD Model and incorporates Multilateral Instrument (MLI) principles. On dividends it sets a 0% rate where the beneficial owner is a company holding at least 10% of the capital continuously for 365 days, and 15% in all other cases. Interest and royalties are taxable only in the residence state of the beneficial owner (0% at source). A specific pension article (Article 17) introduces an inverted-credit mechanism: Denmark grants credit for tax paid in France against Danish liability on the same pension income, resolving the core dispute. [3]

The Spain-Denmark situation remains unresolved as of the date of this review. No new agreement has been signed between Denmark and Spain. Danish expatriates in Spain and Spanish investors receiving Danish-source income must rely on each country's domestic unilateral double-taxation relief rules. Spain's domestic rule (Article 80, Law 35/2006) allows a deduction for foreign taxes paid, but this is not equivalent to full treaty relief. Spanish-resident recipients of Danish dividends face the full 27% Danish domestic withholding, with no treaty-rate reduction available. [4]

What are the key withholding tax rates under Danish domestic law and under treaties?

The table below summarises representative rates. Treaty rates shown are the maximum permitted under each agreement; lower rates may apply where ownership-percentage or holding-period thresholds are met.

*No DTA in force. Domestic rates apply. Domestic interest WHT is 22% only for foreign group companies outside EU/EEA without treaty coverage; non-group interest payments to non-residents are generally 0%.

Dividends paid to qualifying EU/EEA parent companies are exempt from kildeskat (withholding tax) under the EU Parent-Subsidiary Directive as transposed into section 2 of the Danish Withholding Tax Act (Kildeskatteloven). The 10% ownership threshold must be held for at least one year. Interest payments to associated EU companies qualify for 0% withholding under the EU Interest and Royalties Directive. Both reliefs are subject to a strict beneficial-ownership test following the 2019 CJEU rulings in T Danmark (C-116/16) and Y Denmark Aps (C-117/16), which held that conduit structures without substantive economic activity do not qualify. [2]

From 1 July 2024, Skattestyrelsen applies a 44% withholding rate on dividends paid to beneficial owners resident in EU-blacklisted non-cooperative jurisdictions (including Panama, Russia, Trinidad and Tobago, Vanuatu, Samoa, Fiji, Palau, and several US territories). [1]

How does Denmark's MLI ratification affect treaty claims?

Denmark ratified the OECD Multilateral Instrument on 30 September 2019; the MLI entered into force for Denmark on 1 January 2020. Denmark notified 38 covered tax agreements, covering most major bilateral DTAs except those with Germany, Greenland, Japan, the Netherlands, and the Nordic countries, which had already been updated bilaterally to incorporate MLI minimum standards. [5]

Denmark adopted the Principal Purpose Test (PPT) under Article 7(1) of the MLI as its minimum-standard anti-abuse rule. The PPT denies treaty benefits where one of the principal purposes of an arrangement was obtaining those benefits, unless granting the benefit is in accordance with the object of the treaty provisions. Denmark also opted into mandatory binding arbitration under Part VI of the MLI for several covered agreements, including those with France, the UK, Belgium, Italy, and Switzerland. For any given DTA, the MLI applies only where both Denmark and the partner jurisdiction have notified the same provisions. [5]

What is the process for claiming a certificate of residence and a dividend-WHT refund?

A Danish-resident entity seeking to establish treaty entitlement for foreign tax purposes obtains a certificate of residence from Skattestyrelsen. Companies use Form 02.042 (Hjemstedserklaering for selskaber); private individuals use Form 02.034A (Bopaels- og skatteforhold naar der er dobbeltbeskatningsoverenskomst). Both forms confirm full tax liability in Denmark under Article 4(1) of the applicable DTA. Standard processing time is 60 days. Incorrectly completed forms are returned without stamp or signature. [6]

Non-resident shareholders who have had Danish dividend withholding tax (kildeskat) deducted at the 27% domestic rate and who are entitled to a lower treaty rate may claim a refund through Skattestyrelsen's digital refund portal. Required documentation includes: (a) a certificate of tax residence certified by the foreign competent authority at the time of the dividend distribution; (b) dividend advice or custody-account statements confirming the Danish tax was withheld; (c) proof of beneficial ownership on the dividend record date; and (d) trading confirmations if shares were bought or sold within six months of the distribution. Bulk submissions for multiple shareholders are accepted via a special mass-submission format. [7]

The refund deadline is three years from receipt of the dividend (subject to DTA-specific variations). Processing times are currently extended. Skattestyrelsen has notified all applicants who submitted claims before 1 January 2026 that the expected processing time has been extended by 18 months beyond the standard six-month window. Where processing exceeds six months and the delay is attributable to Skattestyrelsen rather than the claimant, statutory interest accrues under section 69B of Kildeskatteloven. For complex queries, contact Skattestyrelsen's refund unit at [email protected]. [7]

This extended backlog has its origins in the CumEx fraud discovered in 2015, when Danish authorities uncovered large-scale dividend-arbitrage schemes that had generated fraudulent refund claims totalling several billion DKK. Denmark's response included a dramatic increase in documentation requirements, larger specialist staffing, and extended audit windows of up to 10 years for substantive-fraud-risk cases. In December 2024 a Danish court convicted the principal architect of the scheme and sentenced him to 12 years' imprisonment.

For guidance specific to your situation, consult a qualified tax professional or review the Denmark country overview for broader context on the Danish tax system.