CL-2018-000297, CL-2018-000404, CL-2018-000590, - [2025] EWHC 2364 (Comm)

in section C.B.3.1, “Rule: Dividends of shares, certificates of shares and similar securities are included in the statement of taxable income. Dividends includes everything that the company distributes to its shareholders or unit holders, regardless of the form in which the distribution takes place. See the Tax Assessment Act (LL) Section 16A, subsection 1. …”;

also in that section, “Individuals subject to the rule: Only the amounts distributed to current shareholders are considered taxable dividends. See LL Section 16A, subsection 2 no.1. The determining factor will then be whether you are a shareholder (i.e. have ownership rights to the share) when declaring the dividend [sic.]”. That is the translation used at trial, but the sense surely will have been “when the dividend was declared” (the Danish was “tidspunktet for deklarering af udbyttet”);

section C.B.3.1 also stated the opinion of the Ministry of Taxation to be that dividends were generally taxed on the basis of dividend rights, and in a summary of sources at the end referred inter alia to a Danish Tax Tribunal decision that a 56.8% shareholder was to be taxed on the basis of the right to 56.8% of dividends that went with the shareholding, since in the Tax Tribunal’s view, “according to practice, a final right to dividends is considered to be acquired at the time of determination of the dividend (declaration) at the company’s general meeting”, and thus “An oral agreement on disproportionate division was not recognised for tax purposes”;

section C.B.3.2 said as to “Time of taxation” that “Taxation of dividends is based on the legal acquisition principle. This means that the shareholder must include the dividend income statement when the final right to the dividend has been acquired … The time of payment itself is irrelevant to the time of taxation.”

in section C.B.2.1.1.5, SKAT explained that share dividends were “The portion of a limited company’s profits distributed between shareholders. For tax purposes, the term includes any financial benefit that accrues to shareholders or members …”; and

in section C.B.2.1.6.1, SKAT asked and answered the question “When is a share acquired or disposed of?”, its answer being that, “A share is acquired or disposed of on the date when there is a final and binding agreement on the acquisition or disposal.” On its face, that statement required there to have been an acquisition or disposal of shares. In that case, it said, then for tax purposes the shares were treated as having been acquired (or disposed of) when a final and binding agreement had come into existence for the acquisition or disposal in question. It did not state that, and therefore did not evidence a view held by SKAT that, shares were acquired (or disposed of) merely by contracting to buy (or sell).

In section C.F.8.2.2.10.1.3, the text sought to explain, in Danish, how best to understand the English term ‘beneficial owner’ in DTTs. With assistance at trial from the interpreter who was sworn so that SKAT’s factual witnesses could have assistance if needed, I find that the Danish text, which was,

“Begrebet retmӕssig ejer

Det er altid den retmӕssig ejer og ikke den, som umiddelbart optrӕder som modtager, der anses for modtager af udbytte i modeloverenskomstens forstand. Se punkt 11 og 12 i kommentaren til modeloverenskomstens artikel 10.

Begrebet retmӕssig ejer er den almindeligt anvendte oversӕttelse af det engelske udtryk beneficial owner.”,

In section C.F.8.2.2.10.3.2, SKAT gave guidance as to “Danish dividend tax refund” in these terms:

“If a source country withholds tax on dividends at a higher rate than agreed in the [DTT], the overpaid tax can be refunded … For a refund of Danish dividend tax, the forms 06.002 (Switzerland), 06.005 (Germany) and 06.003 (all other countries) which can be found at www.skat.dk are used.

One form must be completed per Danish company paying the dividends. The form must be signed by the tax authorities of the country of residence, which must confirm that the recipient of the Danish dividend is domiciled/resident in that country.”

a page on “How to avoid double taxation”, which advised that, “You can avoid double taxation on dividends if the authorities in your country certify your country of residence. If you own Danish shares in the VP Securities Services (Vӕrdipapircentralen), you might risk double taxation of dividends”, and that “You may avoid double taxation on dividends, if: • You are able to certify that your country of residence is outside Denmark. • Your country of residence has entered into a double taxation agreement with Denmark. This means that the Danish withholding of dividend tax is only going to be with the tax rate stated in the double taxation agreement … .”, and included a link for “How to get a refund of dividend tax”;

the page thus linked, “How to get a refund of dividend tax”, which so far as material said only, “The form Claim for Refund of Danish Dividend Tax must be completed and returned to SKAT”, the name of the Form being a hyperlink to Form 06.003 for downloading. SKAT also relied in argument on a bullet point on that page referring to an entitlement to claim a refund on the part of “unit holders who are resident outside Denmark”, but that was part of separate information on the page specific to Swiss investment funds, and “unit holders” referred to holders of units in such a fund.

Danish dividend tax liability was imposed on shareholders, i.e. those with ‘ownership rights’ to shares, when the dividend was declared. It did not explain further, or provide specific guidance about, what it meant by, or what was required to acquire, ‘ownership rights’ to shares.

If ownership rights to shares were acquired, they were treated by Danish tax law as having been acquired when a final and binding agreement for the acquisition was concluded. It did not explain further, or provide specific guidance about, what it meant by, or what was required to constitute, such an agreement.

Foreign shareholders might be entitled to a dividend tax refund, to claim which (for the foreign jurisdictions relevant to these proceedings) Form 06.003 had to be completed and returned to SKAT. However also, by virtue of Article 10 of Denmark’s DTTs, it was the ‘beneficial owner’ (an English language Treaty concept), and not the immediate recipient of a dividend, that had the benefit of the treaty. That was not explained further, nor were its implications considered. At face value, it indicated SKAT’s view to be that the party entitled to claim a tax refund, by virtue of a DTT, need not have been the party considered under Danish tax law to have been the shareholder with the dividend tax liability.

The first may be true, if care is taken over what is meant by it. What SKAT said in the Legal Guide was clearly to the effect that the dividends it taxed were entitlements that, by nature, would always be traceable to the company by which they were declared. The “dividend … the subject of a refund application” to which the DWF Ds referred in the submission meant, I think, a payment, labelled a ‘dividend’ or treated as dividend income, based on the receipt of which a tax refund claim was submitted to SKAT. If that is what was meant, then I agree with the submission.

The second is not true. Firstly, when the Legal Guide referred to ‘shares’, since no different meaning was indicated, that meant shares which are, by definition, traceable to VPS and the company. Secondly, the website made explicit that when SKAT referred to shares in the present context it was referring to securities ultimately custodied at VPS (see paragraph 290(i) above).