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Translation of SKAT's Guidance Note SKM2016.263.SKAT

SKAT is changing its practice as regards time-barring of claims for refunds of dividend tax withheld. This change of practice will have prospective effect.

This is a translation of SKAT's Guidance Note SKM2016.263.SKAT , and only the Danish text has legal validity.

1. Summary
SKAT is changing its practice as regards time-barring of claims for refunds of dividend tax withheld In the future, the limitation period for such claims will be three years. This is a tightening of the practice, and it will have prospective effect.

2. Background and issue
Previous versions of SKAT's legal guidelines stated that the limitation period for claims for refunds of dividend tax over-withheld was five years. This practice was based on an interpretation of section 67A of the Tax at Source Act according to which the provision also covers claims for refund of dividend tax withheld.

In connection with the case concerning refunds of dividend tax withheld, SKAT has taken this interpretation of the scope of section 67A of the Tax at Source Act up for renewed consideration.

3. Legal framework
If a person liable to pay taxes under section 2 of the Tax at Source Act or section 2 of the Corporation Tax Act has received dividend on which a tax amount has been withheld at source under section 65 of the Tax at Source Act which is higher than the final tax amount due under a double tax agreement or Directive 2011/96/EU on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, the amount will be refunded upon request from the person in question, see section 69B of the Tax at Source Act.

Similarly, dividend tax withheld will be refunded upon request when a person who is not liable to pay taxes in Denmark has obtained dividend on which dividend tax was withheld under section 65, see section 67(3).

Under section 3(1) of the Limitations Act, the period of limitation is three years unless otherwise provided by other provisions.

4. SKAT's point of view
Sections 65-65D of the Tax at Source Act are concerned with withholding of dividend tax (section 65), payment of dividend tax by persons with limited liability to pay taxes in situations where tax is not withheld at the source (section 65A), payment of tax on hiring-out of labour by companies with limited liability to pay taxes (section 65B), and withholding of royalty tax (section 65C) and withholding tax (section 65D). These provisions are not concerned with refunds of dividend tax.

It is therefore the point of view of SKAT that section 67A of the Tax at Source Act does not apply to the determination of the period of limitation for claims for refunds of dividend tax withheld. This means that claims for refunds of dividend tax withheld become time-barred after three years under section 3(1) of the Limitations Act.

However, this does not apply if another period of limitation applies under a double tax agreement, such as Article 46(3) of the Danish-German double tax agreement according to which there is a period of limitation of four years for reclaiming tax withheld at the source.

Therefore, SKAT is now changing its practice prospectively so that claims for refunds of dividend tax withheld become time-barred after three years under section 3(1) of the Limitations Act.

5. Effective date
It appears from SKAT's legal guidelines for 2016-1, paragraph A.A.7.1.5 , that it is only possible to implement a tightening change in practice with prospective effect and following the issue of an appropriate notice period allowing citizens to adapt to the changed state of law.

Consequently, the change of practice will take effect three months after publication of this guidance note.

This means that claims for refunds of dividend tax withheld will be regarded as time-barred after five years, if the request for a refund is received by SKAT no later than three months after publication of this guidance note. If the request for a refund is received by SKAT later than three months after publication of this guidance note, the claim for a refund of dividend tax withheld will be regarded as time-barred after three years.

Recipients of dividend who have not yet applied for a refund of dividend tax withheld and whose claim is older than three years will thus have three months from the date of publication of this guidance note to lodge the claim with SKAT.

Claims for refunds of dividend tax withheld will become time-barred as follows:

• after five years, if the request for a refund is received by SKAT before publication of this guidance note;

• after five years, if the request for a refund is received by SKAT in the period after publication of this guidance note and no later than three months after the publication; and

• after three years, if the request for a refund is received by SKAT more than three months after publication of this guidance note.

The change of practice cannot lead to the limitation period being extended past the five years which applied under the previous practice. However, this does not apply if another period of limitation applies under a double tax agreement.

6. Legal effect
The guidance note will be incorporated into SKAT's legal guidelines for 2016-2, paragraph A.B.4.1.4.2 . The guidance note will be abolished after the end of the three-month time limit referred to in paragraph 5 above.