The Danish government has launched a public consultation on amendments to draft bill L 89, which provides for the amendment of existing controlled foreign company (CFC) rules to comply with the EU Anti-Tax Avoidance Directive (ATAD). The government has consulted on and submitted multiple drafts and amendments in parliament for the implementation of ATAT-compliant CFC rules, but the implementation of has been delayed several times due to various concerns. The latest draft amendment provides for a partial substance test in relation to the inclusion of other income from intangible assets as CFC income.

The partial substance test provides the following:

• Other income from intangible assets shall be included in CFC income only if the subsidiary does not carry on significant economic activity relating to the intangible assets as supported by personnel, equipment, assets, and premises, as is apparent from the relevant facts and circumstance;
• Other income from intangible assets is included if the subsidiary handles only the ownership and any sales/distribution functions in relation to its intangible assets, while the other significant functions relating to the assets are only insignificantly performed; and
• The partial substance test does not apply if the subsidiary is tax resident in a state where the competent authority does not exchange information with the Danish tax authorities under a double taxation agreement or another international agreement or convention, including an administratively concluded agreement on tax assistance.

Following the consultation, the amended draft bill L 89 is scheduled to be discussed in parliament on 27 May 2021, with the final vote to be held on 3 June 2021. The planned 1 January 2021 effective date of the draft bill is not changed with the proposed amendments.