Market Insights: Denmark Introduces an Exemption from Withholding Tax for Non-Resident Charities

In welcome news for non-resident charities investing into Danish equities, Denmark has introduced a withholding tax exemption, effective 1 January 2023, allowing eligible investors that have a purely charitable purpose to request a full refund of taxes withheld on dividend events with a record date of 18 April 2018, onward.??

The following conditions must be satisfied for an entity to benefit from the exemption:?

• The beneficial owner is resident in a foreign country.?
• The beneficial owner is comparable to a Danish association.?
• The beneficial owner has a pure charitable purpose as defined under Danish tax law.?

As such, whether a non-resident charity has a pure charitable purpose must be evaluated under Danish law. This will require that – among other things – the potential beneficiaries are defined by objective criteria and that the potential beneficiaries include a wide group of persons. Distributions must be made to recipients that are in financial need, or distributions must be used by recipients in ways considered to be to the benefit of society, e.g. distributions for social, artistic, scientific, or humanitarian purposes.?

Qualifying non-resident charities that have paid Danish dividend withholding tax will be entitled to a full refund of the dividend withholding tax from the Danish state and should partner with WTax to submit reclaim applications to secure these refunds.??

According to the Danish tax authorities, the statute of limitations for refund claims related to the exemption is three years prior to 14 April 2021, meaning that a refund claim can be filed for dividends declared from 14 April 2018.?

WTax will continue to successfully facilitate refund claims for eligible charities holding Danish equities with immediate effect to optimise their investment performance.??

For more information on this development or withholding tax recoveries in general, contact WTax:

T: +44 203 961 7500?E: [email protected]

Or visit our website