December 12, 2004 | By Keith Martin in Washington, DC

DENMARK is considering making it harder to file group tax returns.

Danish holding companies are used by many US multinational corporations, although Holland and Luxembourg continue to be more popular because of their wide treaty networks that reduce taxes in other countries and for other reasons.

Denmark has allowed Danish holding or parent companies to file group returns with their foreign and local subsidiaries since 1903. 

The holding company is free to choose which subsidiaries it wants to include on the group return. Starting in 2004, it has also been possible for two Danish subsidiaries of a common parent company elsewhere in the European Union to join together in filing a group return. 

The government is concerned about the revenue loss. Parent companies choose to include subsidiaries that have losses and exclude those with profits. The tax minister said in late November that the government would ask parliament to tighten the rules.

In the future, either all eligible subsidiaries — both foreign and domestic — would have to be included or none would be. An election would be binding for 10 years. Any subsidiaries in which the holding company owns more than 50% of the shares would have to be included in the event of an election. Under current rules, a subsidiary can be included only if the parent owns all the shares (or, for subsidiaries outside Denmark, all the shares that it is allowed to own under local law). 


The government is expected to ask at the
same time to reduce the corporate tax rate
from 30 to 28%.