Ledelsens sæde og CFC-beskatning. Kan beskatning efter ledelsens sæde-kriteriet erstatte CFC-beskatning?

Abstract

The Danish rules on taxation of foreign companies with their effective place of management located in Den-mark and CFC taxation have been in place since 1995.
Jacob Bundgaard commented on a district court ruling from 2022, expressing that the rules regarding the effective place of management could render many tax-related uncertainties unnecessary and, in several situ-ations, replace the CFC rules. I work daily with tasks that often involve financial companies located abroad, and in this context, I have had considerations about whether a foreign-registered company should become fully taxable in Denmark according to the rules regarding the effective place of management or if CFC tax-ation should be applied to the company. Jacob Bundgaard's postulate, therefore, piqued my interest, and on that basis, I wish to address the following in my thesis:
To what extent and under what circumstances can the rules regarding the effective place of management in section 1, paragraph 6 of the Corporate Tax Act replace the use of the CFC taxation rules in section 32 of the Corporate Tax Act?
According to the rules regarding the effective place of management in section 1, paragraph 6 of the Corporate Tax Act, an independent foreign tax subject will be subject to taxation in Denmark if it has its effective place of management located in Denmark. If the company is subject to Danish taxation, it is considered Danish in all tax-related contexts. There are several different assessments that help define when the effective place of management is in Denmark, but it can be summarized as the place where the daily management and business decisions necessary for the company's business activities are primarily made. The criteria that are crucial for the assessment are situational and depend on the type of activity the company engages in.
CFC taxation arises under section 32 of the Corporate Tax Act if a Danish company or individual controls an independent tax subject, and if the CFC income realized by the subsidiary meets certain limits or is subject to a low tax rate compared to the Danish tax rate. CFC taxation can be avoided under certain conditions designed for cases where active business operations are conducted within the company. If the company is deemed subject to CFC taxation, a portion of the income is included in the Danish tax income. The specific conditions for calculating whether CFC taxation occurs depend on whether it is a company or an individual shareholder who owns the subsidiary.
The rules regarding the effective place of management have remained largely unchanged since their intro-duction, while the CFC rules have been amended several times, most recently in 2021 when the rules were harmonized with the EU Anti-Tax Avoidance Directive. At the same time, rules were introduced for corpo-rate shareholders to avoid CFC taxation of active operating companies. Despite the rules being in effect for many years, there have been relatively few decisions and judgments in these two areas.
Based on the thesis, the conclusion is that taxation under the rules regarding the effective place of manage-ment, in many cases where the company's activity is related to asset management for the capital owners or similar activities, can replace taxation under the CFC taxation rules.