International Taxation

Denmark: Supreme Court judgements of 4 May 2023 in the Takeda-case and the NTC-case

Thomas Frøbert from Bech-Bruun, our Taxand partner firm in Denmark, provides an update on judgements issued by The Danish Supreme Court in the two beneficial owner cases regarding Danish WHT on interest payments from a Danish company. 

Assessment of the taxation of interest on intercompany loans pursuant to EU’s Interest-Royalty Directive

The cases concerned whether Takeda A/S under voluntary liquidation and NTC Parent S.à.r.l. had an obligation to withhold tax on interest on intra-group loans granted by foreign group-affiliated companies. The cases had to be assessed according to Danish tax legislation, the EU’s Interest-Royalty Directive and the double taxation agreements with the Nordic countries and Luxembourg.

In a judgment of 9 January 2023, which concerned dividends distributed to foreign parent companies, the Supreme Court has ruled on when a foreign parent company is the beneficial owner following double taxation agreements with e.g., Luxembourg, and when there is an abuse of rights according to the EU’s Parent/-Subsidiary Directive.

In the present cases on the taxation of interest, the Supreme Court referred to the general questions addressed in judgment from 9 January 2023 and then moved on to make a specific assessment of the structure and loan conditions of the two groups.

The Supreme Court ruled that the companies had to be considered flow-through companies that did not enjoy protection under the Interest-Royalty Directive or under the double taxation agreements.

According to the information that the parties had presented, it could not be determined what had finally happened to the interest after it had flowed through the invested companies, and it could therefore not be determined who was the beneficial owner of the interest.

The Supreme Court then determined that the tax arrangements constituted abuse. Takeda under voluntary liquidation and NTC Parent should therefore have included interest tax of approx. DKK 369 million and approx. DKK 817 million.

The High Court had reached the same result.

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