A Review of the Danish Draft Minimum Tax Act

General

On June 23, 2023, the Danish Ministry of Taxation issued the draft Minimum Tax Act (the ‘Bill’) to give effect to the GloBE rules.

The Bill is subject to a consultation until August 18, 2023.

The draft legislation includes an Income Inclusion Rule (IIR), an Under-Taxed Profits Rule (UTPR)  and a domestic minimum tax (intended to be a QDMTT). Whilst Section 70 of the Bill provides that the IIR and the domestic minimum tax apply for reporting periods beginning on or after December 31,  2023, the UTPR will apply to reporting periods beginning on or after December 31, 2024. This is subject to an exception for UPEs located in Member States that decide to defer the application of the IIR and UTPR until 2030.

The draft law closely follows the EU Minimum Tax Directive and reflects the latest guidance, including aspects of the Commentary, OECD Safe Harbours Guidance and the Administrative Guidance.

The Danish approach to drafting the draft law is similar to Sweden and the Czech Republic in that it redrafts the EU Minimum Tax Directive (and aspects of other OECD relevant guidance) into domestic law.

It is estimated that approximately 75 Danish Ultimate Parent Entities (UPEs) will be required to  submit a GloBE information return on behalf of an MNE group. The Danish Tax Administration estimates that around 7,000 subsidiaries (both foreign and domestic) will be within scope.

It is proposed that the EU Minimum Tax Directive be implemented into domestic law as a separate law, with separate provisions for reporting, inspection, appeals and penalties.

When interpreting the Danish Minimum Tax Act, the explanatory guidance states that other OECD guidance such as the Commentary, Examples and Administrative Guidance will be used. Subsequent updates to OECD commentary and other guidance will therefore be taken into account.

Domestic Groups