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The Danish conduit cases: a landmark ruling on withholding tax and abuse of rights

The CJEU paves the way for denial of withholding tax exemption for private equity holding and finance companies in Denmark, writes Andrew Howard (Ropes & Gray).
 

In an alarming development for some private equity funds the Court of Justice of the European Union (the CJEU) has issued two judgments in the combined N Luxembourg 1 (Case C-115/16)  X Denmark(Case C-118/16)  Danmark I (Case C-119/16) and Z Denmark (Case C-299/16) v Skatteministeriet and T Danmark and Y Denmark Aps (C-116/16 and C-117/16) (I’ll call them the Danish conduit cases) which implies support for or at the very least fails to quash the proposition that the establishment of holding companies in Luxembourg and other European jurisdictions can be abusive and may not qualify for exemption from withholding tax under the Interest and Royalties Directive (2003/49/EC) or the Parent-Subsidiary Directive (90/435/EC now replaced by 2011/96/EU) even where the holding companies are established on a commercial basis. This follows a...

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