Global Daily Tax News, Denmark Sets Out Tax Law Reform Priorities, (Oct 11, 2024)

The Danish Government has set out its legislative priorities for the 2024-25 parliamentary year.

The Government has said it will implement changes to the Minimum Taxation Act to ensure that Denmark's regime aligns with evolving administrative guidelines from the OECD on Pillar Two.

The transfer pricing regime will likewise be amended in line with the political commitment made to support amount B, which provides for a simplified approach to the application of the arm's length principle to in-country baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries.

Requirements regarding transfer pricing documentation will be relaxed, and the rules regarding reverse hybrid entities will be aligned with OECD recommendations.

The Government is also to push for the adoption of legislation amending the rules for the taxation of crypto-assets and also to provide for the international exchange of information on crypto-assets under the EU's eighth iteration of the Directive on Administrative Cooperation in tax matters (DAC 8).

Several amendments are proposed to the tax rules for funds. Among other things, funds will not be taxable on interest income if the debtor is a group company ineligible for a deduction for the corresponding expense as a result of a reduction in eligibility under the thin capitalization rules. In addition, proposed legislative amendments would adjust the rules regarding the right to carry forward certain tax losses in the event of a tax-exempt merger of funds.

Denmark also intends to withdraw the option to immediately write off expenditure on computer software, know-how, and patent rights, and increase the deduction for expenses incurred on research and development activities.

Legislation will also be discussed on the amendment of Denmark's double tax agreement with Greenland.

Other notable proposals include:

• lowering the estate and gift tax on the transfer of family-owned businesses from 15 percent to 10 percent;

• improvements to tax rules to promote entrepreneurship, including repealing tax on dividends from tax-free portfolio shares;

• introducing a zero rate of VAT for domestic airlines' domestic flights;

• implementing changes to the small business VAT scheme from January 1, 2025, in line with EU-wide changes;

• exempting young people aged under 18 from labor market contributions; and

• relaxing the rules regarding deductions against taxable income from sharing economy activities.