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EU issues judgments in Danish cases on beneficial ownership

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The Court of Justice of the European Union (CJEU) issued judgments on February 26 in T Denmark and Y Denmark vs. the Danish Ministry of Taxation (Joined Cases C-116/16 and C-117/16 – ‘the dividend cases’) and in N Luxembourg 1, X Denmark A/S, C Denmark I and Z Denmark ApS vs. the Danish Ministry of Taxation (Joined Cases C‑115/16, C‑118/16, C‑119/16 and C‑299/16 – ‘the interest cases’). The underlying issue in the cases was whether dividend and interest payments were exempt from withholding tax when the payments were made from a Danish company to a company resident within the European Union (EU) which then fully or partially passed on the payments to an ultimate parent company residing in a third country.

The takeaway

The Danish High Court now must decide the final outcome of each case based on the guidance from the CJEU on whether the recipients are beneficial owners or whether there has been an abuse of rights. In the meantime, These judgments will be important for applying the IRD and PSD going forward, and more generally for interpreting terms such as ‘beneficial owner’ and ‘abuse of rights.’

The cases may impact most international group structures and the flow of funds from EU subsidiaries to parent companies when the ultimate parent resides in a third country.

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Doug McHoney

International Tax Services Co-Leader, PwC US

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