Danish fund tax regime – 2024 election by 31 October 2023

In a nutshell:

Each year, foreign investment funds interested in the Danish retail market should check whether they qualify as equity-based investment companies according to Danish tax rules and should consider electing the 2024 tax regime before 31 October 2023. We recommend that investment fund managers register by Friday, 27 October 2023 at the latest.

The regime, which has applied since 2020, was introduced to make foreign funds more attractive for Danish individual investors. Under this regime, the yield on “equity-based investment companies” is taxed as “share income” instead of “capital income,” resulting in lower tax rates that apply within certain brackets.

A closer look

To qualify as an equity-based investment company, an investment fund must fulfill the following requirements:

Initial notification

Initial notification to the Danish tax authorities must be made no later than 31 October before the calendar year for which the election should take effect.

Therefore, initial notifications for 2024 should be filed before 31 October 2023.

Annual reporting

The investment fund must invest at least 50% of its assets in equities as defined by the Danish rules. To prove compliance, the investment fund must compile an asset test on four evenly distributed dates of the calendar year and submit this asset test information annually to the Danish Tax Authorities before 1 July of the following year.

Therefore, asset test information for a 2023 notification should be submitted before 1 July 2024. Accordingly, the asset test information for a 2024 notification should be submitted before 1 July 2025.
 

Qualification as opaque

The fund must qualify as opaque (or non-transparent) for Danish tax purposes. While corporate-based investment funds should typically fulfill this requirement, funds structured on a contractual basis may need an individual assessment.

The list of funds that have applied for this fund tax regime and are considered as equity-based investment companies from 2023 (Liste over aktiebaserede investeringsselskaber 2023) is available on the Danish tax authorities’ website.

Deloitte can help with the registration for your funds as equity-based investment company and with the calculation and submission of the required asset test information within the required deadlines.