Beneficial owner cases

Case nos. 69/2021, 79/2021 and 70/2021
Judgment delivered on 9 January 2023

The Danish Ministry of Taxation
vs.
NetApp Denmark ApS

and

NetApp Denmark ApS
vs.
The Danish Ministry of Taxation

and

TDC A/S
vs.
The Danish Ministry of Taxation

The cases mainly concerned the issue of whether NetApp Denmark ApS and TDC A/S was required to withhold tax on dividends distributed to foreign parent companies. The cases were to be considered on the basis of Danish tax law, the EU Directive on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States as well as double taxation agreements between Denmark and Cyprus, Luxembourg and the USA, respectively.

In its judgment, the Supreme Court considered when a foreign subsidiary is the “beneficial owner” under the double taxation agreements, and when there is abuse of rights under the EU Directive. The Supreme Court then went on to assess each distribution of dividends separately.

The Court concluded that the tax authorities had a claim against NetApp Denmark for not withholding dividend tax. Regardless of the fact that NetApp Denmark could not deposit the contested amounts and, thus, avoid accruing interest during the case, because it was successful in both the National Tax Tribunal and partly also in the High Court, the Supreme Court held that compound interest was payable on the claim under the Danish Act on the Collection of Direct and Indirect Taxes. The Supreme Court called on the legislators to consider whether they intend for the Act to have such consequences.