• Service: Tax, Global Indirect Tax
  • Type: Business and industry issue
  • Date: 8/1/2012

Danish Tax authorities target holding companies 

Danish Tax authorities

Danish tax authorities have sent letters to 2,000 VAT registered holding companies in Denmark seeking to lower their VAT recovery rate and make them pay any over-recovered VAT.

The selection criteria was based on the presence of the word ‘holding‘ in the company’s name, or whether the business registration code used was the one for holding companies. In the letter, the holding company is informed that a VAT audit is pending and that the company had until 1 July 2012 to:

  • calculate the correct recovery rate
  • adjust the VAT for the past three years
  • pay any outstanding VAT this may result in.

Otherwise, they may be penalized or charged interest. Depending on the size/volume of activities of the holding company, the figures involved may be significant. According to an interpretation of the Danish VAT Act, entities with holding as their main activity must use this VAT recovery rate. However, according to the letter from the tax authorities, this also applies to operating companies holding shares in subsidiaries and other companies. Therefore, these companies should also adjust their recovery rate. This has been the view of the tax authorities for many years. However, up until now they had not enforced it. In light of the audit letter, it remains to be seen if this will change, but from the wording of letter this most certainly seems to be the tax authorities’ intention.

If the tax authorities’ view is not changed, it is likely that the number of cases being raised at the Danish National Tax Tribunal will increase. This is obviously an area of uncertainty, and it remains to be seen to what extent the Danish tax authorities will enforce its interpretation.


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