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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: Denmark: Interest

Article 11(1) of the 1980 agreement provides that interest arising in Denmark to a United Kingdom resident who is the beneficial owner of the income is taxable only in the United Kingdom. However, Denmark may tax the interest if it is effectively connected (see INTM153110, fifth sub-paragraph) with a permanent establishment or fixed base which the United Kingdom resident recipient has in Denmark.

The 1991 amending agreement introduced paragraphs (6)-(8) into Article 11. Consequently, from 1992 to 1997 Denmark may, under the agreement, tax interest which is paid to an unquoted United Kingdom resident company where the company is controlled by a person, or by two or more associated or connected persons acting together, who or any of whom would not themselves be able to claim exemption from Danish tax on the interest under Article 11(1). Credit may for those years therefore be given for Danish tax charged on interest paid to an unquoted United Kingdom resident company which is controlled by a person, or by persons, who is, or are, not United Kingdom resident.

Paragraphs (6) to (8) of Article 11 were replaced in the 1996 amending agreement by a more straightforward anti-abuse provision which has effect from 1998.