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Armenia-Denmark

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Tax Treaty between Armenia and Denmark Signed

On 14 March 2018, officials from Armenia and Denmark signed an income and capital tax treaty. The treaty is the first of its kind directly between the two countries, although the 1986 tax treaty between Denmark and the former Soviet Union had continued to apply, but was terminated.

Taxes Covered

The treaty covers Armenian profit tax, income tax, and property tax. It covers Danish income tax to the state and income tax to the municipalities.

Residence

If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to claim any relief or exemption from tax provided by the treaty.

Withholding Tax Rates

  • Dividends –
    • 0% if the beneficial owner is a company that directly owns at least 50% of the paying company’s capital and has invested more than EUR 2 million (or equivalent in Danish or Armenian currency) in the capital of the paying company;
    • 0% if the beneficial owner is the other Contracting State or central bank of that State or any public authority or other public institution (including a financial institution) owned by the Government of that other State;
    • 5% if the beneficial owner is a company that directly owns at least 10% of the paying company’s capital and has invested more than EUR 100,000 (or equivalent in Danish or Armenian currency) in the capital of the paying company;
    • Otherwise 15%
  • Interest –
    • 0% if paid to a Contracting State or a local authority, including that central bank of that State, or any institution, public authority, or fund owned by the Government of a Contracting State;
    • 5% if paid in respect of any loan granted by a bank;
    • Otherwise 10%
  • Royalties – 5% for royalties paid for the use of, or the right to use, any computer software, any patent, trademark, design or model, or plan; or for the use of, or the right to use, any secret formula or process, or for information concerning industrial, commercial or scientific experience (know-how); otherwise 10%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries generally apply the credit method for the elimination of double taxation.

Limitation on Benefits

Article 29 (Limitation of Benefits) includes the provision that income derived from a Contracting State and legally owned by a resident of the other Contracting State may be taxed in the first-mentioned State in accordance with its domestic law if that income is not subject to taxation in the other Contracting State or is subject to legislation giving access to special benefits for income from foreign sources.

Article 29 also includes a general anti-abuse provision, which provides that a benefit under the treaty will not be granted in respect of an item of income if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit would be in accordance with the object and purpose of the relevant provisions of the treaty.

Entry into Force and Effect

The treaty will enter into force the day following the exchange of the ratification instruments and will apply from 1 January of the year following its entry into force.

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