CJEU hands down important judgments in Danish cases on beneficial ownership


On 26 February 2019, the Court of Justice of the European Union (CJEU) issued its judgments in T Denmark and Y Denmark vs. The Danish Ministry of Taxation (Joined Cases C-116/16 and C-117/16 – “the dividend cases”) and in N Luxembourg 1, X Denmark A/S, C Danmark I and Z Denmark ApS vs. the Danish Ministry of Taxation (Joined Cases C‐115/16, C‐118/16, C‐119/16 and C‐299/16 – “the interest cases”). The underlying question of the cases was whether dividend and interest payments were exempt from withholding tax, when the payments were made from a Danish company to a company resident within the EU if the payments were fully or partially passed on to an ultimate parent company resident in a third country. A brief explanation of the decision can be found via the hyperlink.

It is now up to the Danish High Court to decide the final outcome of each case based on the guidance from the CJEU whether in fact the recipients are the beneficial owners and/or whether there is an abuse of rights. In the meantime, however, these judgments will be extremely important for the application of the IRD and PSD going forward and also more generally for the interpretation of terms such as “beneficial owner” or “abuse of rights”.

The cases have a significant impact on most international group structures and the flow of funds from EU subsidiaries to parent companies when the ultimate parent is resident in a third country.