Denmark's exclusive economic zone

14 June 2024

The importance of the expansion of the taxation competence

According to the previous Danish tax rules, the Danish taxation competence could generally only be invoked within the 12-nautical mile limit calculated from the Danish coast – unless special rules applied, for example for hydrocarbon taxation.

Following the adoption of the Act, Danish taxation competence now also includes offshore activities outside the 12-nautical mile limit, but within Denmark's exclusive economic zone. The limited tax liability applies to both foreign companies and individuals. 

For companies liable to pay hydrocarbon tax, the extension of the rules on limited tax liability may also mean that these companies must now submit an ordinary corporate tax return instead of a hydrocarbon tax return.  

Included offshore activities

The expansion of the rules on limited tax liability includes activities in Denmark's exclusive economic zone when the activities concern the establishment, operation and use of artificial islands, installations and plants. 

The expansion of the limited tax liability also includes activities for the establishment and operation of wind turbines and wind farms. 

According to the preparatory work, the concepts of "establishment, operation and use" must be interpreted broadly and all types of work that are directly related to artificial islands, installations and plants (including wind farms) in Denmark's exclusive economic zone are included. 

This also includes activities that are carried out in connection with the maintenance and dismantling of installations and plants - for example, servicing or replacing components of wind turbines in a wind farm within the exclusive economic zone will thus be covered by the expanded right of taxation. 

Activities initiated in relation to the storage of CO2 in the subsurface in the Danish part of the North Sea are also included. 

Activities in connection with the establishment, operation and use of submarine cables and pipelines, which are only used for transit through Denmark's exclusive economic zone, are not included by the expanded right of taxation.

What does it mean?

The tax conditions which follow from the expansion of the rules should be taken into account in the planning of new offshore projects in Denmark. Already existing offshore projects are also comprised by the expanded right of taxation, which is why there may be a need for analysis and adjustment of set-ups as well as clarification of the obligations that the limited tax liability entails.

We can help

In Deloitte's tax department, we have specialists with a specific focus on offshore activities who can help with advice and sparring in relation to your activities and obligations.