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Denmark: Package of Measures to Combat Cross-Border Tax Evasion and Use of Tax Havens

(Nov. 24, 2014) On November 6, 2014, the Danish Ministry of Taxation published a package of measures on the prevention of tax evasion and the use of tax havens. (Laura Ambagtsheer-Pakarinen, Denmark: Government Publishes Package on Measures to Prevent Tax Evasion, TAX NEWS SERVICE (Nov. 6, 2014), International Bureau of Fiscal Documentation online subscription database.)

The measures include, among others, the following:

• Adopting a proactive role internationally by, inter alia, working to increase the use of automatic information exchanges between tax authorities to strengthen the fight against the use of tax havens.

• Creating greater transparency of enterprise ownership by establishing an ownership register of “real owners” of corporations and foundations, under the Danish Business Authority, to which the tax authorities will have direct access. The plan is to develop the register during 2015 with a view to formulating the necessary legislation in the autumn of that year, given that negotiations on the European Union’s draft Money Laundering Directive are ongoing and expected to be completed at the end of 2014.

• Increasing disclosure of ownership of limited partnerships by including them in the proposed business ownership register, to prevent such entities being used to launder foreign assets.

• Pursuing fair taxation of assets taken out of the country by avoiding too wide a discrepancy between Danish valuation of assets, set in binding responses by the tax authority on the tax implications of asset valuation, and the value once transferred outside Denmark. To this end, the Danish Tax and Customs Administration will be given the option to disregard a binding response if later an asset’s value differs significantly from the value assigned in the binding response, and a maximum period of validity of a binding response will be set at six months.

• Making recommendations to tax advisors who provide cross-border tax advice, focusing on their responsibility not to offer solutions that contribute to tax evasion. For example, they should base their advice insofar as possible on adequate information about the facts; they should be wary of demands for unusual solutions or advice involving the use of tax havens; they should base advice on the assumption that all relevant information can withstand the light of day; and if they have good reason to doubt a tax assessment and no clarification is provided, their advice should include a statement to that effect.

• Enhanced monitoring of money laundering activities, conducted by the Danish Business Authority, through increased checks of businesses and introduction of other methods such as unannounced inspections, made possible in part by providing DK4 million (about US$672,000) annually for the task. At the same time, the Danish Business Authority will have the power to conduct unannounced inspections of real estate agents, accountants, tax consultants, and other “service providers.” (Id.; STYRKET INDSATS MOD SKATTELY: BEKÆMPELSE AF GRÆNSE-OVERSKRIDENDE SKATTEUNDDRAGELSE OG SKATTELYKONSTRUKTIONER [STRONGER ACTION AGAINST TAX HAVENS: TACKLING CROSS-BORDER TAX EVASION AND TAX STRUCTURES] (Nov. 2014), Danish Ministry of Taxation website.)