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Issues with our Tax Services

During the spring of 2020, we identified insufficiencies in internal processes supporting the tax services we offer customers with securities in their custody accounts. Consequently, we initiated a thorough review to uncover all potential issues.

Some of the issues may cause customer detriment because they may result in incorrect tax treatment of returns on securities or delays in services. Most of the customers affected are customers of Danske Bank in Denmark, the remainder being customers with Danske Bank in the other Nordic countries.

We are fully committed to solving the issues and ensuring that we provide our customers with correct tax treatment of their securities. In case an issue will result in a direct loss for the individual customer, we will of course compensate the customer.

Types of issues

The issues identified so far fall into three categories:

  • Delays and errors in our processes for tax-reclaim and relief-at-source services
  • Reporting errors due to system limitations
  • Potential tax benefit errors due to inadequate cross-border controls

Delays and errors in our processes for tax-reclaim and relief-at-source services

We have identified insufficient processes in our reclaim and relief-at-source services related to our handling of returns on foreign securities on behalf of our customers. This has caused errors in tax services rendered to our customers and delays in our processing of tax claims, such as delays in transferring tax repayments for US securities.

    • For our 2,900 customers affected by delays in our tax reclaim service, we have, as expected, completed the compensation payments except for special cases.

    • For our 2,400 customers affected by delayed tax repayments for US securities, we have, as expected, completed the compensation payments in Sweden, Norway and Finland except for special cases. In Denmark, we are in dialogue with the Danish Tax Authorities regarding determining the type of compensation.

Reporting errors due to system limitations

We have identified limitations to the systems supporting our tax services that have caused errors. Investigations so far have shown that in some cases incorrect dividend declaration codes have been applied to some customers’ custody accounts potentially resulting in unjustified tax benefits. In addition, we have identified minor discrepancies in returns on US securities paid out to customers as a result of incorrect exchange rates being applied by the systems.
  • Further analysis indicates that there may be cases among 130 corporate customers who could still be affected by incorrect dividend declaration codes. We are implementing procedures and controls to ensure proper application of the dividend declaration codes and we are informing the affected customers about the issue and the process going forward.

Potential tax benefit errors due to inadequate cross-border controls

We have identified inadequate cross-border controls primarily when delivering tax services to customers who move from one country to another and thus from one tax jurisdiction to another. The inadequate control can lead to incorrect tax benefits being applied.
  • We are currently investigating this area in more detail.

Timeline

  • We submit written response to the Danish Financial Supervisory Authorities information about potential other issues in our tax services.
    Read response

  • In April 2021, we inform customers who have been affected by delays in our tax reclaim service. Also in April 2021, we completed our handling of the backlog of outstanding reclaims.
  • In January 2021, we begin to inform customers who may not have received the dividend tax repayments on US securities to which they are entitled.

  • In August 2020, we begin identifying which customers who have not received the dividend tax repayments on US securities to which they are entitled. Also in August 2020, we begin processing the backlog of outstanding reclaims.

  • As part of a review of the operating model in our Tax Services unit, we identify issues with our processes for dividend tax reclaims as well as dividend tax repayments from the US tax authorities. We update our processes to prevent such issues from reoccurring.

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