Holding company registered in Switzerland considered to have fiscal domicile in Denmark

Date 4 okt. 2010


In a recent ruling, the Danish National Tax Tribunal upheld a decision of the Tax Administration which considers a holding company (hereinafter the "Holding Company") to have fiscal domicile in Denmark despite the fact that the Holding Company has been registered in Switzerland since 1973. The decision includes an interpretation of the concept of domicile in the Danish Companies Taxation Act.


The case in brief

The Holding Company had been registered in Switzerland since 1973 and was the holding company of a group of companies (hereinafter “the Group”). In association with another company, that was also part of the Group, the Holding Company formed a public limited company (hereinafter “the Public Limited Company”).


It appears from the transfer pricing documentation for the Public Limited Company that the Public Limited Company should design and implement the Group's financial management, including budgeting and performance reporting. The executive board of the Public Limited Company consisted of the four executives of the Group.


The Holding Company had its own board of directors, but no executive board. The board of directors consisted of JN who was chairman and who, until January 2003, had been CEO of the Group until he retired. The Holding Company had entrusted the management of its capital expenditures to external investment managers. The external portfolio managers were, among others, companies which were part of the Group and which invested on behalf of the Holding Company in order to maximize portfolio returns. Some agreements related only to investments in shares, while others related to management of all securities, deposits, loans etc. in several banks and credit unions in Denmark and abroad. Further, the scope of the portfolio management agreements was loans and deposits with other companies within the Group.


During the case, the question was whether the Holding Company should be considered to have fiscal domicile in Denmark or in Switzerland. In the judgment of the Danish Tax Tribunal, the concept of domicile in the Danish Companies Taxation Act was interpreted.


The legal background

It appears from the Danish Companies Taxation Act, that companies are considered domiciled in Denmark if their management has its registered office in Denmark. This applies no matter where the company is registered.


The judgment of the Danish National Tax Tribunal

The Danish National Tax Tribunal made an evaluation of where the Holding Company's actual daily management took place. The Danish National Tax Tribunal found that the place where decisions were made about how rights under the shares were exercised was important. Similarly, it should be taken into account where negotiations regarding financing of the Holding Company’s activities occurred.


Furthermore, the National Tax Tribunal stated that if a company's sole business is to hold shares in other companies, and if there is no actual daily management of the company, the place in which other decisions concerning its management is taken must be taken into account. This is entirely in line with current practice.


The National Tax Tribunal then found that notwithstanding the fact that the executive board of the Holding Company had formally adopted decisions concerning the Holding Company, the decisions had actually been taken in Denmark. The Tribunal emphasised that there had not been a real daily management of the Holding Company, and that there was never more than one member of the executive board present at the board meetings.

The Tribunal then held that the Holding Company's management was located in Denmark, thus the holding company’s fiscal domicile was in Denmark.


The consequences of the judgment

The judgment contributes to the clarification of the criterion of management's registered office as the basis for full tax liability in Denmark. For the evaluation of where a company's management has its seat, emphasis is put on where decisions concerning how rights of shares are to be exercised is made, and where the financing of a company’s activities is negotiated.



If you have any questions or require additional information on the judgment contact Partner, Adjunct Professor Jakob Bundgaard (jbu@mwblaw.dk) or Junior Associate Kim David Lexner (kdl@mwblaw.dk).  


The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis for decisions or considerations.