In a case handled by Bachmann/Partners Law Firm on behalf of a client, the National Tax Tribunal ruled on 26 March 2025 that amounts the client received as dividends from a Norwegian company were also, for tax purposes, to be regarded as dividends and therefore taxed as share income. The Danish Tax Agency had decided that the amount should be regarded as personal income with no possibility of credit relief for dividend tax withheld in Norway. The National Tax Tribunal overturned the Agency’s decision.
The case concerned shareholder A, who was a shareholder in a Norwegian company, B AS. In 2020 and 2021, A received dividends from B AS that deviated from A’s ownership share in the company. Dividend tax was withheld in Norway.
Because the distributions deviated from A’s ownership share, the Danish Tax Agency considered the portion that deviated from A’s ownership share to be personal income.
Under Norwegian law, shareholders may allocate dividend rights disproportionately, meaning the right to dividends does not have to follow ownership share. Such disproportionate distribution can, however, only apply for a period not exceeding two years. In other words, Norwegian law allows disproportionate dividend allocation for up to two years. B AS had made use of this possibility at two general meetings.
A argued that because the Nordic double taxation treaty defines the term “dividend” in such a way that it must be defined as it is under the law of the country where the distributing company is resident — in this case Norway — Denmark must respect this classification when calculating A’s income. It was undisputed that Norway had classified the amounts in question as dividends, including withholding Norwegian dividend tax when paying A.
The National Tax Tribunal agreed that the 2020 and 2021 distributions from B AS should, under Danish tax law, be fully classified as dividends under the Nordic double taxation treaty, since the amounts were regarded as dividends under Norwegian domestic law. Therefore, the distributed amounts were to be taxed as share income, even though they exceeded A’s proportional ownership share in B AS.
The National Tax Tribunal also agreed that A was entitled to credit relief in Danish tax for the dividend tax withheld in Norway.
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