The Danish fund tax regime - 2021 election by 1 November 2020

News

The Danish fund tax regime - 2021 election by 1 November 2020

5 October 2020

Operational Tax News

Foreign investment funds interested in the Danish retail market should check whether they qualify as equity-based investment companies according to Danish tax rules and consider electing for the new tax regime from 2021 before 1 November 2020.

A new regime that applies from 2020 has been introduced to make foreign funds more attractive for Danish individual investors. Under the new regime, the yield on “equity-based investment companies” is taxed as “share income” instead of “capital income”, resulting in lower tax rates that apply within certain brackets.

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To qualify as an equity-based investment company, an investment fund must fulfill the following requirements:
 

  • Initial notification
    Initial notification to the Danish tax authorities must be made no later than 1 November prior to the calendar year for which the election should take effect.
    Therefore, initial notifications for 2021 should be filed before 1 November 2020.
     
  • Annual reporting
    The investment fund must invest at least 50 percent of its assets in equities as defined by the Danish rules. To prove compliance, the investment fund must submit asset test information annually to the Danish Tax Authorities before 1 July of the following year.
    Therefore, asset test information for 2020 should be submitted before 1 July 2021.

  • Qualification as opaque
    The fund must be qualified as opaque (nontransparent) for Danish tax purposes. While corporate-based investment funds should typically fulfill this requirement, funds structured on a contractual basis may need an individual assessment.


The list of funds that have applied for this fund tax regime and are considered as equity-based investment companies from 2020 (Liste over aktiebaserede investeringsselskaber 2020) is available on the Danish tax authorities’ website.

Contacts

Jacquou Martin
Managing Director
International Fund Tax Solutions
T +352 45145 2174
jacmartin@deloitte.lu

Caroline Schmitt
Senior Manager
International Fund Tax Solutions
T +352 45145 4088
caschmitt@deloitte.lu

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