Beneficial ownership case

Case no. 34/2022
Judgment delivered on 30 June 2023

Heavy Transport Holding Denmark ApS
vs.
The Danish Ministry of Taxation

The main issue in this case was whether Heavy Transport Holding Denmark ApS was required to withhold tax on dividends, and if so, whether the company was responsible for the payment of the amount withheld. In addition, the Court was called upon to consider the issue of interest on any tax due, including whether charging such interest would be in contravention of Article 6 of the European Convention on Human Rights or Article 47 of the EU Charter of Fundamental Rights. Heavy Transport Holding Denmark had requested that a question be referred for a preliminary ruling to the EU Court of Justice.

With reference to the Supreme Court’s judgment of 9 January 2023 (UfR 2023.1575), Heavy Transport Holding Denmark submitted in particular that the distribution of dividends did not amount to abuse of rights, as the company could have been liquidated, and the liquidation proceeds transferred directly to the shareholders in Panama without being taxed.

The Supreme Court held that the tax treatment was to be based on the distribution actually made, and not on whether the company could have been liquidated. The Supreme Court went on to consider that the distribution of dividends amounted to abuse of rights under EU law in respect of the benefits granted under the Parent-Subsidiary Directive, and that the parent company in Luxembourg was not the beneficial owner of the dividends according to the Double Taxation Agreement between Denmark and Luxembourg.

The Supreme Court also held that Heavy Transport Holding Denmark was aware of the legal basis for the tax liability on the dividend distribution to the parent company in Luxembourg under Section 2(1)(c) of the Danish Corporation Tax Act. No information had been produced to show that Heavy Transport Holding Denmark had had sufficient grounds to believe that the dividends were not taxable. The fact that KPMG acted as advisers for the Group in the matter of the arrangement was not capable of calling into question this assessment.

The Supreme Court also held that the interest payable under the Danish Act on the Collection of Direct and Indirect Taxes, the purpose of which is, among other things, to incentivise the payment of taxes due, did not amount to an infringement of Heavy Transport Holding Denmark’s right to a fair trial under Article 6 of the European Convention on Human Rights or Article 47 of the EU Charter.

Finally, the Supreme Court stated that there was no doubt as to the interpretation of Article 47 of the EU Charter that justified referring a question for a preliminary ruling to the European Court of Justice.

The Supreme Court thus affirmed the judgment of the High Court with the amendment that interest was payable on the tax claim pursuant to Section 7 of the Collection Act with effect from 21 December 2010.