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Supreme Court of Denmark

Obligation to withhold tax on distributed dividend 

Case no. 65/2015

Judgment delivered on 18 May 2016

RF Holding ApS
The Danish Ministry of Taxation

Company had not established that dividend had been distributed to a foreign parent company that met the requirements for exemption from withholding dividend tax

Under Danish tax legislation, a company must withhold dividend tax if it adopts to pay or credit dividend on shares in the company. These rules do not apply if a foreign parent company that fulfils certain conditions receives the dividend, and if taxation must be waived under the EU Parent/Subsidiary Directive or a double taxation treaty.

RF Holding had informed the Danish tax authorities, SKAT, that it had adopted to distribute dividend of DKK 62,874,867 to its parent company in Luxembourg at its general meeting in June 2006. However, the parent company had not recognised the dividend as income in its financial statements for 2006, and had only corrected this after having been contacted by SKAT. The only documentation showing that the dividend had in actual fact been distributed to the parent company in Luxembourg consisted of documents prepared internally in the group or by related parties. The dividend was distributed as claims on the Luxembourg company's parent company in the Cayman Islands and was therefore only a matter of bookkeeping.

The Supreme Court found that RF Holding had not established that the dividend was received by a foreign parent company that met the requirements for exempting RF Holding from withholding dividend tax. The fact that revised annual reports of LMR Investments for the years 2006, 2007 and 2008 had been prepared after the High Court's judgment did not lead to a different assessment of the evidence. These reports had been prepared based on material already produced during the proceedings in the High Court.

In addition, the Supreme Court agreed that RF Holding was liable for the payment of the dividend tax not withheld under section 69(1) of the Danish Withholding Tax Act.

The Supreme Court thus affirmed the judgment of the High Court.

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