Ørsted to fight Danish taxation of its UK offshore wind farms

The Danish Tax Agency has decided to tax Ørsted’s Walney Extension and Hornsea One offshore wind farms in the UK and the developer has now announced an appeal to this decision to the Danish Tax Appeals Agency.

Namely, Ørsted received an administrative decision on 1 December for the tax years 2015 and 2016, with the Danish Tax Agency’s claim amounting to DKK 6.6 billion (approximately EUR 887 million), interests included.

“According to the decision, Ørsted is to be taxed in Denmark on the full future value of the two offshore wind farms, despite the fact that 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 wind farms were built”, the developer stated.

The company said it would lodge an appeal with the Danish Tax Appeals Agency and also take steps to ensure that the Danish and UK tax authorities initiate negotiations to avoid Ørsted being subjected to double taxation. If necessary, the case could be referred to an independent arbitration panel.

The developer will also ask the Danish Tax Agency for a deferral of the tax payment until the case has been decided.

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

It is unknown if the Danish Tax Agency will employ the same tax assessment on Ørsted’s other offshore wind farms and according to the company this has not yet been clarified.

The 1,218 MW Hornsea One is currently the world’s largest operational offshore wind farm. The last of the 174 Siemens Gamesa 7 MW wind turbines were installed in early October 2019 and the project was fully commissioned in January of this year. The wind farm has been built at the site some 120 kilometres off Yorkshire.

The 659 MW Walney Extension consists of 40 8 MW MHI Vestas and 47 7 MW Siemens Gamesa offshore wind turbines, which have been in full operation since September 2018. The wind farm is located some 19 kilometres from the Walney Island coast in Cumbria.