This article was first published on Tax@Hand, and is reproduced on this blog with the authorization of its authors.
The French Tax Authorities (FTA) on 21 May 2025 published guidelines on the new tax treaty between Denmark and France. As a reminder, after more than 13 years without a treaty, the two countries signed a new treaty in 2022, which entered into force on 29 December 2023, and generally applies as from 1 January 2024.
The treaty generally follows the 2017 OECD model treaty and includes numerous key provisions of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS MLI), although the treaty is not covered by the BEPS MLI as the treaty was signed after Denmark and France each deposited their respective BEPS MLI instrument of ratification.
Key clarifications
The administrative guidelines provide clarification regarding several provisions of the new treaty.
Recognized pension funds
According to article 4 of the treaty, a “recognized pension fund” of a contracting state will be treated as a “resident” of that contracting state. The guidelines clarify the concept of recognized pension funds and confirm that they include, in the case of France, “Fonds de reserve pour les retraites” (retirement reserve funds).
Permanent establishment
With regard to the notion of permanent establishment (article 5), the FTA reminds that an installation or drilling rip or ship used for the exploration of natural resources constitutes a permanent establishment only if it lasts more than 12 months, and that an anti-abuse provision is provided for by the treaty.
International shipping and air transport
Regarding the treaty provisions applicable to international shipping and air transport (article 8), the FTA details the different types of activities covered and hence taxable only in the contracting state in which the place of effective management of the enterprise is located. The FTA also confirm that the provisions of article 8 have now replaced the exchange of letters of 28 February 1930 between Denmark and France.
Withholding taxes
The guidelines reiterate—without further details—the withholding tax rates applicable to investment income:
- Dividends (article 10): A 0% rate applies to dividends paid to a company that holds directly at least 10% of the capital of the payer company throughout a 365-day period that includes the date of payment of the dividends (for the purpose of computing that period, changes in ownership that directly result from a corporate reorganization of the company that holds the shares or the payer company will not be taken into account). Where dividends are paid out of income or gains derived from immovable property by an investment vehicle that distributes most of this income annually, and whose income or gains from such immovable property are exempt from tax, to a recipient that directly or indirectly holds at least 10% of the capital of the investment vehicle, the dividends may be taxed at the domestic rate applying in the source state. Otherwise, the rate is 15%.
- Interest (article 11): 0% (interest arising in a contracting state and beneficially owned by a resident of the other contracting state is taxable only in that other state).
- Royalties (article 12): 0% (royalties arising in a contracting state and beneficially owned by a resident of the other contracting state are taxable only in that other state).
Private pensions
According to article 17 of the treaty, private pensions paid to a resident of the other contracting state are, in principle, taxable only in that other state. However, there are a limited number of exceptions, where private pensions may be taxable in the source state. The FTA provides a list of the private pensions covered and reminds that a “grandfather” clause may apply to certain pensions that were only taxable in the residence state on the date that the new Denmark-France treaty was signed (4 February 2022).
Collective investment vehicles
Finally, according to the protocol to the treaty, collective investment vehicles may enjoy the benefits of the treaty provisions applicable to dividends and interest.
The FTA notes that collective investment vehicles covered by the UCITS directive (Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)) are able to enjoy the benefits of these provisions without specific conditions, whereas other collective investment vehicles will have to meet certain requirements.
