Refund of Dividend Withholding Tax

Frida Mokkelbost & Amanda Emilie Matthiesen

Student thesis: Master thesis


The Danish government entered an agreement about business and entrepreneurship initiatives on the 30th of August 2017. Chapter 1, initiative 6 aimed to attract foreign capital to Danish UCITs by regulating the dividend withholding tax legislation. The Danish tax authorities (SKAT) experienced fraud with the refund of dividend withholding tax, due to investors claiming to possess stocks in Danish companies and request refund for some of the withholding tax. The stocks turned out to be fictional, and the Danish tax authorities reimbursed refund for 12.4 billion, without having withheld the tax. The dividend from Denmark is taxed with a rate of 27 pct., even though double taxation treaty or other administrative agreements between states or jurisdictions reduced the taxation from 27 to 15 pct., with KSL §§ 65 and 67. The investors could subsequently request the Danish tax authorities for the excessive tax of 12 pct., with KSL § 69 B. This refund would then be approved, without elucidating whether the investor where the beneficial owner. The purpose of this thesis is to determine what the current legislation on dividend is and analyse how it was possible for the investors to request refund for shares without being the beneficial owner, creating a loss for the Danish tax authorities. The Danish tax legislation is intended to be regulated October 2018 in order to implement a new model, where dividends are taxed at the time of distribution and with the final tax rate at source. The model intends to reduce fraud, create transparent taxation and reallocate the administrative costs of documentation. In order to compare the current legislation with the expected future bill the economic circumstances are analysed. The incentives and behaviour of the parties implicated are analysed to observe what affects them because of the new legislation. The efficiency of the new legislation is also analysed in order to create the most efficient state. With the abundant regulation in Danish taxation overregulation is a concern many CEO’s share. Due to the new model being implemented in Danish law, the tax regulation is once again regulated. With the concern of overregulation, a new solution of increasing the monitoring of dividend tax is presented; in order to be proportional, minimize the risks of fraud and administration costs. The thesis concludes that the future bill is considered overregulation and the best solution is to increase the monitoring with a substantial hiring of employees to Danish tax authorities.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2018
Number of pages118
SupervisorsCaspar Rose