Ørsted has been notified by the Danish Tax Agency (DTA) and UK HM Revenue & Customs (HMRC) that an advisory commission established under the EU Arbitration Convention has issued a final opinion on the taxation rights related to the offshore wind farms Walney Extension and Hornsea 1.

According to the opinion, the two offshore wind farms have a genuine legal and economic purpose, in line with the legal principles for the taxation of services applied by Ørsted. As a result, the projects should primarily be taxed in the country where they are located, in this case the UK, over their lifetime as they generate power and revenue.

Ørsted said the outcome is consistent with its understanding of international tax regulations and their application to the offshore wind industry.

Case dates back to 2015

The case began in 2015, when Ørsted asked the DTA and HMRC to clarify the allocation of taxation rights between Denmark and the UK and avoid double taxation on its offshore wind farms.

The two tax authorities failed to reach an agreement, and the case was subsequently referred to the advisory commission in 2023.

While the final opinion follows the legal principles Ørsted has applied, it will result in a minor upward adjustment to the company’s overall tax position in Denmark, together with related interest. Ørsted said the adjustment is fully covered by its existing provisions for uncertain tax positions.

Over time, the tax charge in Denmark will largely be offset by tax reductions in the UK, according to the company.

Ørsted to discuss other projects with tax authorities

Following the opinion, Ørsted will enter into discussions with the DTA to seek a resolution for other projects involving similar administrative decisions or draft assessments by the Danish tax authority.

The company expects those cases to be resolved according to the same legal principles set out in the final opinion on Walney Extension and Hornsea 1. Ørsted will also enter into dialogue with HMRC regarding the application of the opinion.