The Danish tax authorities have announced that negative interest rates are interest for tax law purposes.
On 27 February 2015, the Danish tax authorities issued guidelines concerning the Danish tax treatment of negative interest rates. In the guidelines, the Danish tax authorities state:
"Under section 6e of the Danish State Taxation Act, interest expenses on debt are deductible from the taxable income. Based on its wording, the provision is not limited to the debtor's interest expenses on debt. The right of deduction is also considered to be available where the interest expense is incurred by the creditor."
According to the Danish tax authorities, negative interest paid by a creditor to a debtor is deductible by the creditor as interest expenses and is taxable for the debtor as interest income.
With this interpretation of the tax concept of interest, the Danish tax authorities seem to have gone a long way in order to find a practical solution to the challenge.
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