Ørsted appeals tax ruling relating to two UK offshore windfarms

The Danish Tax Agency’s claim amounts to Dkr5.1Bn, plus interest amounting to Dkr1.5Bn, a total of DKK 6.6Bn (US$1.1Bn).

According to the decision, Ørsted is to be taxed in Denmark on the full future value of the offshore windfarms, despite the fact they are developed, owned, and operated by British subsidiaries of the Ørsted group and are already taxed in the UK.

The decision also entails that the date of taxation is brought forward, as Ørsted, according to the Danish Tax Agency, should be taxed on the future value long before the offshore windfarms were built.

Ørsted said it disagrees with the decision and will appeal it to the Danish Tax Appeals Agency. The company said it also plans to take steps to ensure Danish and UK tax authorities initiate negotiations to avoid Ørsted being subjected to double taxation, if necessary, by referring the case to an independent arbitration panel.

Ørsted chief financial officer Marianne Wiinholt said, “The Danish Tax Agency’s decision is clearly based on a misconception of the risks and value creation in Ørsted’s business model for developing, constructing, and operating offshore windfarms.

“As early as 2015, we asked the Danish and UK tax authorities to clarify the taxing rights between the two countries, so that offshore windfarms would not be taxed twice. However, the Danish tax authorities broke off negotiations, and haven’t wanted to reopen them since.”

The company said that if a final decision leads to an increase in Danish taxation, there may, even with an offsetting effect in the UK, be a negative NPV effect of up to Dkr4Bn due to differences in terms of the amount and timing of taxation between Denmark and the UK.

Ørsted said it will ask the Danish Tax Agency for a deferral of the tax payment until the case has been decided.

At this stage, it has not been clarified whether the Danish Tax Agency will seek to resume the tax assessment of other Ørsted offshore windfarms.