The Double Taxation Relief (Taxes on Income) (Denmark) Order 1991

Explanatory Note

(This note is not part of the Order)

The Protocol scheduled to this Order makes certain alterations to the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (Denmark) Order 1980.

The Protocol introduces special rules in respect of income, profits and gains from oil and gas related activities and also amends the Convention in certain other respects.

Amendments are made to the permanent establishment rules to cover the construction and installation of pipeline and the making of oil wells (Article II), and to the capital gains rules to cover the disposal of offshore mineral exploration or exploitation rights and assets (Article V).

A new Article is introduced to cover the profits and earnings from activities connected with offshore oil and gas exploration and exploitation. Trading profits from such activities are deemed to arise through a permanent establishment or fixed base and may therefore be taxed in the country in which the activities are carried on. The earnings of employees are, in general, to be taxed only in the country in which the employment is exercised. Further special rules, however, apply to profits from the transportation of supplies and personnel, and to the earnings of employees engaged in such activities (Article X).

Amendments are also made to the Articles of the Convention dealing with Interest and Royalties. These new rules provide that tax will not be repaid where the beneficial owner of the interest is a company, other than a company quoted on a stock exchange in the country of which it is a resident, unless the company can show (subject to a de minimis limit) that it is not controlled by a person or a group of persons who would not have been entitled to repayment of the tax had the interest or royalty payment been received direct.

The Protocol is generally to take effect in the United Kingdom on or after 6th April in the calender year following that in which it enters into force. But new provisions dealing with employees of the British Embassy or at the British Council in Copenhagen (Article VIII) will take effect for duties performed in employment on or after 1st January 1980. The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes