Ørsted has received a final opinion from an advisory commission under the EU Arbitration Convention on the taxation of its Walney Extension and Hornsea One offshore wind farms, concluding that the projects should primarily be taxed in the UK.
The Danish Tax Agency (DTA) and UK HM Revenue & Customs (HMRC) notified Ørsted of the opinion on 10 September.
According to Ørsted, the opinion confirms that the two offshore wind farms have a genuine legal and economic purpose and should therefore be primarily taxable in the country where they are located and where they generate power and revenue.
Ørsted said the outcome is consistent with the legal principles it has applied to the taxation of services related to its offshore wind projects.
The company first asked the DTA and HMRC to clarify the taxation rights between Denmark and the UK in 2015, with the aim of ensuring that its offshore wind farms would not be subject to double taxation.
The two tax authorities failed to reach an agreement, and the case was referred to an advisory commission in 2023.
The opinion will result in a minor upward adjustment to Ørsted’s overall tax position in Denmark, along with related interest. The company said the adjustment is fully covered by existing provisions for uncertain tax positions.
Over time, the additional tax charge in Denmark will largely be offset by tax reductions in the UK, according to Ørsted.
The company will now enter into discussions with the DTA regarding other projects where the Danish authority has made similar administrative decisions or draft assessments.
“Based on the opinion, Ørsted will enter into a dialogue with the DTA to find a resolution regarding the other projects where the DTA has made similar administrative decisions or draft assessments. It is Ørsted’s expectation that a resolution regarding these projects will follow the same legal principles as those laid out in the opinion received today. Similarly, Ørsted will enter into dialogue with HMRC regarding the application of the opinion”, the company said on 10 September.
Located approximately 19 kilometres from the Walney Island coast in Cumbria and operated from Ørsted’s West Coast Hub in Barrow, the 659 MW Walney Extension consists of 40 MHI Vestas 8 MW and 47 Siemens Gamesa 7 MW offshore wind turbines which have been in full operation since September 2018. Ørsted owns 50 per cent stake in Walney Extension, with the remainder held by AIP Management and PFA.
The 1.2 GW Hornsea One, located 120 kilometres off the Yorkshire coast, has been fully operational since 2019. The offshore wind farm, which comprises 174 Siemens Gamesa 7MW turbines, is owned by Ørsted (50 per cent) and Greencoat, TRIG & Equitix, GLIL & Octopus Renewables.