The US Treasury Department this week announced that US Ambassador James P. Cain and Danish Tax Minister Kristian Jensen have signed a new Protocol to amend the existing bilateral income tax treaty, concluded in 1999, between the two countries.
The Protocol was signed on Tuesday.
The agreement significantly reduces tax-related barriers to trade and investment flows between the United States and Denmark. It also modernizes the treaty to take account of changes in the laws and policies of both countries since the current treaty was signed. The Protocol brings the tax treaty relationship with Denmark into closer conformity with U.S. treaty policy.
The most important aspect of the Protocol deals with the taxation of cross-border dividend payments. The Protocol is one of a few recent US tax agreements to provide for the elimination of source-country withholding tax on dividends arising from certain direct investments and on dividends paid to pension funds.
The Protocol also strengthens the treaty's provisions preventing so-called treaty shopping, which is the inappropriate use of a tax treaty by third-country residents.
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