Taxation of Income in Foreign Trusts: Denmark Introduces a New Anti-avoidance Rule Targeting the Use of Foreign Trusts

Denmark has introduced a new provision that states that Danish settlors of foreign trusts, under certain circumstances, must include the trust’s income in their own taxable income. The provision forms part of the Danish legislator’s recent attempts to prevent international tax evasion/ avoidance, and the underlying aim of the provision is to make the rules concerning foreign trusts easier to administrate and enforce by the Danish tax authorities. Based on an analysis of the provision’s area of application and legal effects, it is concluded that the new provision seems to be effective in mitigating the use of foreign (family) trusts for tax evasion/avoidance purposes. However, it is also concluded that there is reason to question whether the new provision is sufficiently precise and whether the aim could have been reached in a more expedient way