Compatibility of Danish Tax Incentives with GloBE Model Rules

Nanna Dahlgaard Bay

Student thesis: Master thesis


On 20 December 2021, the OECD/G20 Inclusive Framework on BEPS released the GloBE Model Rules which will assist in the implementation of a significant part of the OECD-agreement regarding a two-pillar solution. The agreement signed on 8 October by 137 jurisdictions follows up on the outstanding work under BEPS and introduces a 15 pct. Global minimum tax. The Model Rules are particularly significant in the way they are intended to take into consideration more than 137 tax systems and make a combined approach to effectively determine whether a MNE is taxed below the minimum rate and thereby should be subject to additional taxation. Meanwhile, with extensive work required to compute such rules, Governments worldwide have adopted various financial support instruments to promote R&D by businesses and increasingly rely on tax incentives. These incentives depart from general taxing principles resulting in favorable tax treatment or even a reduction of the overall tax burden. In that trend, Denmark is no exception and currently several R&D tax incentives are available through national tax legislation. This thesis examines the main R&D tax incentives currently available in Danish legislation with the purpose of determining whether these will be able to coexist with the GloBE Model Rules. Throughout the thesis, it will be evident that the Model Rules are designed in a way that take into consideration that the Model Rules should not harm national tax incentives supporting local innovation and economic growth. The intention with Danish R&D tax incentives are mainly focused on SMEs and start-ups, whereas the scope of GloBE is large MNE Groups. Furthermore, the Model Rules apply the deferred tax accounting approach to address timing differences; however, there are a number of limitations incorporated to protect the integrity of the outcomes under the GloBE Model Rules. The thesis concludes that the Danish R&D tax incentives and the GloBE Model Rules can coexist. But it also further highlights the complexity of the Model Rules because of the deferred tax attributes are limited at the minimum rate, even when the jurisdictional tax rate is higher, which could potentially course some issues or even undermine the purpose of the Model Rules

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2022
Number of pages108