Denmark's tax authority, Skattestyrelsen (the Danish Tax Agency), has expanded its mandatory reporting rules for foreign entities with taxable activities in Denmark. The changes take effect for fiscal periods beginning on or after 1 January 2026, with the first compliance deadline falling in mid-2026 for most affected entities. Non-compliance carries financial penalties and, in serious cases, loss of treaty benefits.
Denmark's updated tax legislation introduces stricter disclosure obligations for foreign companies, funds, and branches that generate income subject to Danish corporate income tax or withholding tax. Affected entities must file enhanced information returns documenting their tax residency status, permanent establishment analysis, and cross-border payment flows. The first reporting deadline applies to fiscal years opening on 1 January 2026, with returns due within six months of the period end.
This alert explains which business categories are caught by the new rules, what threshold criteria apply, and the specific actions international businesses should take before the first deadline arrives.
What changed and when it applies
Denmark's amended tax legislation introduces two principal changes. First, it expands the scope of mandatory country-by-country disclosure for non-resident entities earning Danish-source income. Second, it raises the detail required when asserting that a tax treaty reduces or eliminates withholding tax on dividends, interest, and royalties paid to foreign recipients.
Under the previous regime, many foreign entities relied on self-certification to claim treaty protection. The new rules require positive documentation. Entities must now provide a formal tax residency certificate issued by their home jurisdiction's competent authority, together with a substance analysis supporting their treaty position. Danish tax legislation previously permitted lighter-touch procedures; that latitude has been removed.
The permanent establishment question has also been tightened. Foreign companies conducting preparatory or auxiliary activities in Denmark must now affirmatively demonstrate that those activities fall below the permanent establishment threshold. Passive reliance on the exemption is no longer accepted. Where activities have evolved over time – for example, where a liaison office has taken on order-processing functions – Danish tax authorities will scrutinise whether a taxable presence has arisen.
The effective date is 1 January 2026. Entities whose fiscal year follows the calendar year must file their first enhanced return by 30 June 2026. Entities with non-standard fiscal years should calculate their deadline from the close of the first fiscal period that opens on or after 1 January 2026. For advice on how Danish tax law applies to your entity's specific situation, contact a specialist before the deadline.
Which foreign entities are affected
The new reporting obligations apply primarily to three categories of foreign entity.
Foreign corporations and holding structures receiving Danish-source dividends, interest, or royalties are directly affected. This includes EU-resident parent companies invoking the EU Parent-Subsidiary or Interest and Royalties directives, as well as non-EU entities relying on a bilateral tax treaty. All must now submit the enhanced documentation package alongside their withholding tax refund or exemption claim.
Foreign branches and representative offices operating in Denmark face the most significant change. Those that have historically filed limited or nil corporate income tax returns must now complete a full permanent establishment analysis. If the analysis reveals a taxable presence, back assessments may follow for prior periods.
Foreign investment funds and collective vehicles distributing income to Danish investors, or receiving Danish-source income, are caught where their aggregate Danish-source receipts exceed a modest threshold set in the amending legislation. Funds structured in low-tax jurisdictions receive particular scrutiny under the updated rules.
Threshold criteria: the enhanced obligations apply where Danish-source gross income in any twelve-month period exceeds DKK 500,000. Alternatively. There. The entity has had any physical presence. including employees working remotely from Denmark. for more than sixty days in a calendar year. Both thresholds must be assessed annually. Falling below the threshold in one year does not exempt an entity from monitoring its position in subsequent years.
For a broader picture of how corporate structure choices interact with these obligations, see our overview of corporate law considerations for foreign entities in Denmark.
To receive an expert assessment of how these new reporting rules apply to your entity's Danish operations, contact us at info@ferrazwhitmore.com.
Immediate actions for international businesses
The following steps should be completed before the first reporting deadline.
- Map all Danish-source income streams. Identify every payment flowing from Denmark to a non-resident group entity – dividends, interest, royalties, service fees, and lease payments. Determine whether each stream is currently subject to withholding tax, exempt under a treaty, or exempt under EU legislation. Document the basis for each position.
- Obtain updated tax residency certificates. Many companies hold certificates that are one to two years old. Danish tax legislation now requires certificates dated within twelve months of the filing date. Request updated certificates from your home jurisdiction's competent authority immediately, as processing times vary significantly by country.
- Conduct a permanent establishment review. If your group has personnel, assets, or contracts executed in Denmark, commission a formal permanent establishment analysis under the current treaty and Danish domestic rules. Pay particular attention to employees working remotely from Denmark and to digital service delivery arrangements that may create a fixed place of business.
- Review existing treaty claims for substance compliance. Where a group entity claims a reduced withholding tax rate, assess whether that entity has sufficient economic substance in its jurisdiction of residence. Danish tax authorities are expected to challenge substance-light structures aggressively under the new rules.
- Update internal compliance calendars. Record the applicable filing deadline, assign responsibility within your tax function, and build in a four-week buffer for legal review and document translation. Late filings attract automatic penalties under Danish tax legislation, with no de minimis exemption for first-time failures.
International groups should also review comparable developments in neighbouring jurisdictions. A related alert covering new tax reporting requirements in Portugal sets out the parallel obligations arising under Portuguese tax legislation, which may affect the same group entities.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our tax law practice covers corporate income tax planning, withholding tax compliance, tax treaty analysis, and permanent establishment risk management for international groups operating across Europe and beyond. We combine Portuguese civil law expertise with English common law tradition, giving clients a dual-perspective approach to cross-border tax structuring. Engaging a lawyer in Denmark with coordinated international coverage is essential when new reporting rules simultaneously affect multiple group entities across different jurisdictions. As an international law firm with experience before the Skattestyrelsen and comparable European tax authorities, Ferraz & Whitmore helps clients build compliant, defensible positions under current and evolving tax legislation. For a preliminary review of your entity's Danish reporting obligations, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.