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June 18, 2024

Denmark introduces new reporting obligation on royalty payments

  • From 1 July 2024 all payments of royalties to nonresidents must be reported to the Danish tax authorities irrespective of whether the recipient is exempt from Danish taxation on the royalty.

The Danish Parliament's enactment of a bill this spring (Bill No. L 119 C; see Act No. 333 of 4 April 2024), expanding the obligation to report royalty payments under section 66 A of the Danish Withholding Tax Act, will affect royalty payments to nonresidents made on 1 July 2024 and thereafter.

Resident individuals and companies making royalty payments to nonresident individuals and companies have thus far only been required to report royalty payments if the nonresident recipient was liable for Danish tax on the royalty. Nonresidents are not subject to Danish taxation on royalties if the royalty is exempt from Danish taxation under:

  • The European Union (EU) Interest and Royalty Directive
  • A tax treaty, if the Danish entity has obtained a preapproval from the Danish tax authorities not to apply withholding tax to the royalty payments

As of 1 July 2024 and thereafter, Danish payors must report to the Danish tax authorities all royalty payments made to nonresidents, unless the recipient is tax exempt under the EU Interest and Royalty Directive. The reporting obligation applies irrespective of whether the recipient is subject to Danish tax on the royalty, and irrespective of whether the recipient is affiliated with the payor.

The reporting must be made no later than the last banking day in the month of payment or accrual of the royalty for large companies, and no later than the tenth day of the month following the payment or accrual of the royalty (for royalties paid in December, the deadline is 17 January) for small companies. In this respect, a company is treated as a small company if its payment of labor market contribution (referred to as AM-contribution) does not exceed 250,000 Danish krone (DKK250,000) per year, or its payment of salary withholding tax (referred to as A-tax) does not exceed DKK1m per year.

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Contact Information

For additional information concerning this Alert, please contact:

EY Denmark, Copenhagen

EY Denmark, Aarhus

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor