CFC Rules and Minimum Taxation: In Light of the Implementation of the Danish Minimum Taxation Law

Abstract

This thesis examines the implementation of the Danish minimum taxation law, which came into effect on December 31, 2023. The legislation is intended to operate in conjunction with the Danish CFC regulations. Before addressing the issue of implementing the Danish minimum taxation law, the thesis examines the historical development of the Base Erosion and Profit Shifting project and the evolution of Danish CFC rules. In the legal analysis, the thesis illuminates whether there is any overlap between the Danish minimum taxation law and the Danish CFC rules. It can be concluded that there is significant overlap in scope, and the purposes of the two sets of rules are similar. However, there are also differences in the structures and approaches of the two sets of rules. The economic analysis post-implementation of the Danish minimum taxation reveals both positive and negative consequences. The Danish minimum taxation law is anticipated to raise transaction and compliance costs for Danish multinational enterprises and the government due to information imbalances, fostering uncertainty. This may prompt Danish multinational enterprises to make opportunistic moves, complicating income reporting in their operational jurisdictions. Consequently, the state faces significant financial burdens in terms of oversight and regulation expenses. Moreover, some Danish multinational enterprises have leveraged tax conditions to gain a competitive edge in investment decisions. Nonetheless, the implementation of the Danish minimum taxation law is expected to mitigate this trend, promoting fairer market conditions centered on competition rather than tax advantages. Finally, the integrated analysis proposes harmonizing Danish CFC rules and the Danish minimum taxation law to reduce administrative burdens for both multinational enterprises and the state, enhancing legal certainty and transparency. However, challenges are identified in implementing this solution, including the need for a directive change and resistance from the state due to potential reduction in tax revenue.