Quick answer: The India-Denmark DTAA caps dividends at 15% for 25%+ shareholders but 25% for other cases — since that exceeds India's 20% domestic rate, most taxpayers apply the lower domestic rate instead. Interest is 10% on bank loans and 15% otherwise (government interest exempt), while royalties and FTS are capped at 20%, matching India's domestic rate and providing no reduction. Signed 8 March 1989, this is one of India's older DTAAs.
Key takeaways:
- Dividends: 15% for 25%+ holdings; 20% domestic rate applies otherwise
- Interest: 10% on bank loans, 15% general; government interest exempt
- Royalties and FTS capped at 20%, the same as the domestic rate
- Construction PE threshold: 183 days; no separate services PE clause
- 2013 Protocol (effective 2015) updated exchange-of-information rules
Overview of the India-Denmark DTAA
The Double Taxation Avoidance Agreement (DTAA) between India and the Kingdom of Denmark is a comprehensive bilateral tax treaty designed to prevent double taxation of income and capital earned by residents of either country. Originally signed at Copenhagen on 8 March 1989 and entering into force on 13 June 1989, this is one of India's older DTAAs and follows the OECD Model Tax Convention framework, reflecting Denmark's long-standing OECD membership.
Denmark is a key Nordic trade partner for India, with bilateral economic relations spanning pharmaceuticals, shipping, renewable energy, information technology, and engineering services. The DTAA ensures that businesses and individuals are not taxed twice on the same income, facilitating cross-border trade and investment. However, unlike India's more recent treaties with Nordic neighbours such as Norway and Sweden, the India-Denmark DTAA features relatively higher withholding tax rates on several income categories, particularly royalties and fees for technical services at 20%.
The treaty was amended by a Protocol signed on 10 October 2013, which entered into force on 1 February 2015. This Protocol primarily updated provisions related to the exchange of information (bringing the treaty in line with OECD transparency standards) and introduced provisions for sharing banking information. The treaty has been further modified by the Multilateral Instrument (MLI) from FY 2020-21 onwards.
Treaty History & Current Status
The India-Denmark DTAA was signed at Copenhagen on 8 March 1989 and came into effect on 13 June 1989. Under Article 30, its provisions took effect for income years beginning on or after 1 January 1990 — in India, the fiscal year commencing 1 April 1990. The treaty was negotiated based on the OECD Model Tax Convention, though the article numbering differs from the standard OECD model — dividends are covered under Article 11 (not Article 10), interest under Article 12, and royalties/FTS under Article 13.
An Amending Protocol was signed on 10 October 2013 in Copenhagen, which entered into force on 1 February 2015 (notified on 22 May 2015). This protocol primarily replaced provisions related to the exchange of information, bringing the treaty in line with the OECD's updated standards on transparency. Notably, the Protocol introduced provisions for exchange of banking information and information without domestic interest, addressing concerns about tax evasion through Danish financial intermediaries.
Under the Multilateral Instrument (MLI), both India and Denmark have ratified the BEPS Convention, signed on 7 June 2017. The MLI entered into force for India on 1 October 2019. For the India-Denmark DTAA, the MLI modifications — including the Principal Purpose Test (PPT) for anti-abuse and updated permanent establishment provisions — became effective from FY 2020-21 onwards.
Key Treaty Articles
Business Profits (Article 7)
Business profits of a Danish enterprise are taxable only in Denmark unless the enterprise carries on business in India through a permanent establishment (PE). If a PE exists, India can tax only the profits attributable to that PE. The article follows the OECD attribution approach, allowing deduction of expenses incurred for the purposes of the PE, including a reasonable allocation of executive and general administrative expenses.
Dividends (Article 11)
Dividends paid by an Indian company to a Danish resident may be taxed in India, but the tax follows a two-tier structure. The rate shall not exceed 15% of the gross amount if the beneficial owner is a company which owns at least 25% of the shares of the company paying the dividends, and 25% of the gross amount in all other cases. These rates are notably higher than India's more modern treaties. For the general 25% rate, the domestic rate of 20% may actually be lower, meaning the treaty rate does not provide any benefit in such cases — the taxpayer should apply the lower of the two rates under Section 90(2) of the Income Tax Act.
Interest (Article 12)
Interest arising in India and paid to a Danish resident follows a tiered structure. For interest on bank loans, the rate is limited to 10% of the gross amount. For all other interest, the rate is 15% of the gross amount. Interest paid to the Government or the Central Bank of Denmark (Danmarks Nationalbank) is exempt from Indian tax. These rates offer modest savings compared to the domestic 20% rate, but the differentiation between bank and non-bank lending is important for Danish financial institutions.
Royalties & Fees for Technical Services (Article 13)
Both royalties and fees for technical services (FTS) arising in India and paid to a Danish resident are subject to a maximum rate of 20% of the gross amount. Since the domestic withholding rate is also 20%, the treaty provides no effective reduction for these payments. However, the treaty rate of 20% serves as a cap, protecting against any future increase in domestic rates. The article covers payments for copyrights, patents, trademarks, designs, secret formulas, processes, as well as managerial, technical, and consultancy services.
Capital Gains (Article 14)
Capital gains from the sale of immovable property are taxable in the country where the property is situated. Gains from sale of movable property forming part of a PE can be taxed in the country of the PE. Gains from sale of ships or aircraft operated in international traffic are taxable only in the country of which the seller is a resident. Unlike the OECD Model, the treaty permits source-country taxation of share gains: gains on shares of companies whose property consists principally of immovable property may be taxed where that property is situated (Article 14(4)), and gains on other shares representing at least 10% of a company's share capital may be taxed in the country where the company is resident (Article 14(5)). Other gains are taxable only in the seller's country of residence, subject to India's domestic anti-avoidance rules including GAAR and indirect transfer provisions.
Withholding Tax Rates Summary
The following table compares the DTAA treaty rates with India's domestic withholding tax rates for payments to Danish residents:
| Income Type | DTAA Rate | Domestic Rate | Benefit |
|---|---|---|---|
| Dividends (25%+ holding) | 15% | 20% | 5% saving |
| Dividends (other cases) | 25% | 20% | No benefit (domestic lower) |
| Interest (Bank loans) | 10% | 20% | 10% saving |
| Interest (Other) | 15% | 20% | 5% saving |
| Royalties | 20% | 20% | No benefit (same rate) |
| FTS | 20% | 20% | No benefit (same rate) |
For detailed rate breakdowns, see our dedicated India to Denmark withholding tax rates page. Note that under Section 90(2) of the Income Tax Act, the taxpayer can choose the lower of the treaty rate or domestic rate, so the 25% dividend rate would not apply in practice when the domestic rate is 20%.
Permanent Establishment Rules
Article 5 of the India-Denmark DTAA defines a permanent establishment as a fixed place of business through which the business of an enterprise is wholly or partly carried on. The definition includes:
- A place of management, branch, office, factory, workshop, or mine/quarry/oil well
- A building site or construction, installation or assembly project (or connected supervisory activities) that continues — together with other such sites or projects — for 183 days or more
- An installation or structure used for exploration of natural resources carried on for 183 days or more in any twelve-month period, a warehouse for a person providing storage facilities for others, and premises used as a sales outlet
The treaty specifically excludes from PE status: facilities used solely for storage or display of goods; maintenance of stock solely for processing by another enterprise; and activities of a preparatory or auxiliary character. Under the MLI modifications effective from FY 2020-21, the anti-fragmentation rule applies, meaning complementary activities previously treated as auxiliary may now collectively constitute a PE.
Dependent Agent PE
A person acting on behalf of a Danish enterprise in India is deemed a PE if that person has and habitually exercises authority to conclude contracts in the name of the enterprise. The MLI has expanded this to cover persons who habitually play the principal role in concluding contracts that are routinely concluded without material modification by the enterprise.
Tax Residency & Certificate Requirements
To claim treaty benefits, a Danish resident must obtain a Tax Residency Certificate (TRC) from the Danish Tax Agency (Skattestyrelsen), certifying that the person is a tax resident of Denmark for the relevant period. In addition, the Danish resident must submit Form 10F to the Indian payer, providing details such as nationality, tax identification number, and period of residential status.
The Indian payer deducting withholding tax under Section 195 of the Income Tax Act must ensure that the TRC and Form 10F are obtained before applying the reduced treaty rate. Without these documents, the payer must deduct tax at the full domestic rate. For remittances abroad, compliance with Form 15CA/15CB requirements is mandatory, with a Chartered Accountant certifying the applicable DTAA rate in Form 15CB.
Mutual Agreement Procedure (MAP)
Article 25 of the India-Denmark DTAA provides for a Mutual Agreement Procedure when a resident considers that actions of either country result or will result in taxation not in accordance with the treaty. The competent authorities — the Ministry of Finance in India and Skattestyrelsen in Denmark — shall endeavour to resolve the dispute by mutual agreement.
Under the MLI, mandatory binding arbitration may apply if both countries have opted for it. India has not opted for Part VI (arbitration) of the MLI, so disputes that cannot be resolved through MAP will not be subject to mandatory arbitration under this treaty. Taxpayers may still pursue domestic remedies through the appellate process.
How to Claim Treaty Benefits
Claiming DTAA benefits under the India-Denmark treaty involves the following steps:
- Obtain TRC from Denmark: The Danish resident must request a Tax Residency Certificate from Skattestyrelsen (Danish Tax Agency) for the relevant financial year.
- File Form 10F: Submit Form 10F electronically on the Indian income tax portal, providing residency and treaty details.
- Self-Declaration: Provide a self-declaration confirming beneficial ownership and that the income is not connected to a PE in India, along with details of no PE status.
- Submit to Indian Payer: Share TRC, Form 10F, and self-declaration with the Indian company making the payment so they can apply the applicable treaty rate.
- Section 90/90A Relief: If taxes have been withheld at a higher rate, the Danish resident can claim relief under Section 90 of the Indian Income Tax Act by filing an Indian tax return and claiming credit for taxes paid.
- Form 15CA/15CB: The Indian payer must file Form 15CA online and obtain a CA certificate in Form 15CB for remittances exceeding INR 5 lakh, certifying the DTAA rate applied.
For a detailed walkthrough, read our guide on how to claim DTAA benefits in India. Companies expanding into India from Denmark should also review our Denmark company registration guide and tax advisory services.
Frequently Asked Questions
What is the withholding tax rate on dividends under the India-Denmark DTAA?
The India-Denmark DTAA provides two rates for dividends: 15% for companies owning at least 25% of shares in the paying company (Article 11(2)(a)), and 25% in all other cases (Article 11(2)(b)). However, since the domestic Indian rate is 20%, the 25% treaty rate offers no benefit, and the taxpayer should apply 20% under Section 90(2) of the Income Tax Act.
Why is the royalty rate under the India-Denmark DTAA 20%?
The 20% rate for royalties and FTS under Article 13 reflects the treaty's age — it was signed in 1989 when India's standard treaty position on royalties was higher. India's more recent DTAAs typically provide 10% or 15% rates. Since the domestic rate is also 20%, the treaty offers no reduction for royalties and FTS payments to Denmark.
When did the MLI become effective for the India-Denmark DTAA?
The MLI entered into force for India on 1 October 2019. For the India-Denmark DTAA, MLI modifications — including the Principal Purpose Test — became effective from financial year 2020-21 onwards. The 2013 Protocol had already updated the exchange of information provisions before the MLI's application.
Is a Tax Residency Certificate mandatory to claim treaty benefits?
Yes, obtaining a Tax Residency Certificate from Skattestyrelsen (Danish Tax Agency) is mandatory under Indian law (Section 90(4) of the Income Tax Act). Without a valid TRC, the Indian payer must deduct tax at full domestic rates. Form 10F must also be submitted along with the TRC.
What is the PE threshold for construction projects under this treaty?
Under Article 5, a building site or construction, installation or assembly project (or connected supervisory activities) constitutes a permanent establishment if it continues — together with other such sites or projects — for 183 days or more. Unlike many of India's other DTAAs, the treaty has no separate services PE clause.
Can the domestic rate apply instead of the higher treaty rate on dividends?
Yes. Under Section 90(2) of the Indian Income Tax Act, a taxpayer can apply whichever rate is lower — the treaty rate or the domestic rate. For dividends where the treaty rate is 25% but the domestic rate is 20%, the taxpayer should apply the domestic rate of 20%. This section ensures that a DTAA never results in a higher tax burden than domestic law.
What was amended by the 2013 Protocol?
The Protocol signed on 10 October 2013 primarily updated the exchange of information provisions (Article 26) to align with the OECD's updated standards on tax transparency. It introduced provisions for exchange of banking information and information without domestic interest, enhancing India's ability to obtain tax-related information from Danish authorities.
This article is for general information only and is not legal, tax, or investment advice. Confirm current rules with the relevant authority or a qualified professional — or ask our team. See our full disclaimer.
Doing business between India and Denmark? Our team handles the treaty filings.
Tax Advisory for Foreign Investors in IndiaDenmark — Dividend Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| Substantial holding (25%+ ownership) Beneficial owner is a company which owns at least 25% of the shares of the company paying the dividends | 15% | 20% | Article 11(2)(a) |
| General (other cases) All other dividend payments to beneficial owners resident in Denmark | 25% | 20% | Article 11(2)(b) |
Denmark — Interest Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| Bank loans Interest paid on any loan of whatever kind granted by a bank to a beneficial owner resident in Denmark | 10% | 20% | Article 12(2)(a) |
| General (other cases) Interest paid in all other cases to beneficial owner resident in Denmark | 15% | 20% | Article 12(2)(b) |
| Government/Central Bank Interest paid to the Government or Central Bank (Danmarks Nationalbank) of Denmark | 0% | 20% | Article 12(3) |
Denmark — Royalty Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General Royalties for use of or right to use any copyright, patent, trademark, design, model, plan, secret formula or process | 20% | 20% | Article 13(2) |
Denmark — FTS Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General Fees for technical services including managerial, technical, or consultancy services | 20% | 20% | Article 13(2) |