Investor tax reporting services
In 2019, the Danish Parliament adopted a new bill that improves access for foreign investment funds to Danish retail investors. The objective of this new tax regime, applicable from 1 January 2020, is to make foreign "equity" based funds more attractive to Danish individual investors.
Equity-Based Investment Company reporting
Key Features
| Up-front registration | ✅ |
| Taxation mechanism | Asset based |
| Annual reporting | ✅ |
| Deadline of the reporting | 6 months after calendar year-end |
Main features
Foreign investment funds investing at least 50% of their assets (average during the year) may opt for the "Equity-Based Investment Company" regime. This regime allows Danish investors to benefit from a more favourable taxation on their equity investments.
To enter this regime, fund managers have to give notice to the Danish tax authorities before 1 November of the preceding year (with possibility for newly launched sub-funds to access the reporting regime the year of the launch).
The list of funds registered for the Equity-Based Investment Company reporting regime can be found on the Danish tax authorities website (section "liste over aktiebaserede investeringsselskaber")
On an annual basis, fund managers have to prove that the fund qualifies for the regime, i.e. invests on average at least 50% of its assets in "equity" as defined by the Danish tax legislation. This asset test should be performed at least on a quarterly basis and submitted to Danish tax authorities no later than 1 July of the following year. Upon the annual asset test, no minimum income calculation is required.
Benefits of the regime
Danish retail investors of foreign investment funds with the “equity-based investment companies” benefit from the same tax rates applicable to equity investments, as gains and dividends from equity-based investment companies will be considered as “equity income”.
Capital gains and losses are taxed according to a mark-to-market principle, i.e. the investors are taxed on both realised and unrealised gains and losses accrued in the relevant calendar year.
For sub-funds for which the Equity-Based Investment Company regime has not been elected, Danish individual investors will be taxed in the same way, except from the fact that capital gains, losses and distributions, if any, are taxed in the capital income.
Other regimes
Two other regimes are applicable to funds: the “Investment Fund with Minimum taxation" ("IMB") regime which corresponds to a tax transparency reporting regime, and the "Investment Company" regime which is the default regime applicable to foreign funds. Due to the difficulties in applying for the first regime (complex calculation, burdensome rules...), very few foreign funds applied for the IMB status. Danish individuals investing in foreign equity funds qualifying as "investment companies" are taxed on the capital income instead of on the equity income with lower taxation rates.
Scope of services
- Upfront registration;
- Calculation of the average equity ratio (on a quarterly/monthly/daily basis) according to Danish tax act;
- Reporting to the Danish tax authorities within six months following the calendar year;
- Assistance in consultations with the Danish tax authorities and the Danish Ministry of Finance relating to the Equity-Based Investment Company regime;
- Assistance for investors' and distributors' questions on the reporting;
- Consultancy and fund structuring.
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Contact us
Christian Heinz
Tax Partner, Global Tax Compliance Leader, PwC Luxembourg
Tel: +352 621 33 2247
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