Corporation Act - Shareholder's agreements and tax consolidation(Taxwatch (Tax news in english))
07-04-2010 07:30
Af
Hans-Henrik Nilausen
On March 1, 2010 parts of the new corporation tax act came into force. Even though the act is not a tax act, it has an impact on the “tax area” with respect to tax consolidation.
In companies with 2 or more shareholders, it is quite common that their mutual relations are regulated in a shareholders agreement. In such a shareholders agreement it is often decided that all decisions of materiel importance demand consensus between the shareholders.
So far, such agreements have had no relevance in relation to the Danish tax consolidation regulations according to which 2 companies are comprised by mandatory tax consolidation if one of the companies holds the majority of votes in the other company. Last year, the Special Commissioner of Taxes established that this applies despite the contents of agreement between the shareholders.
However, the General Commissioner of Taxes has recently decided that this practice cannot be maintained with the new corporation act because the definition of a group in the corporation tax act has been adapted to the corporation act.
Consequently, a company holding more than 50 % of the votes in another company will not be subject to mandatory tax consolidation with that company if other shareholders have a right of veto.
The published decision by the General Commissioners of Taxes refers to a case where it in a shareholder’s agreement was decided that “all decisions” demanded consensus between the shareholders.
The practical impact of the decision is probably limited to such cases. The central tax authorities (SKAT) has over the phone informed us, that the case would probably not have had the same outcome if it in the shareholder’s agreement had been stated, that only materiel decisions, would demand consensus between the shareholders. Based on SKAT’s pronouncement, it is necessary to make a concrete evaluation in each single case.
We expect that SKAT will also take into consideration whether the companies are consolidated for accounting purposes when assessing whether the companies are subject to mandatory Danish tax consolidation.
In the financial statements act which belong under the Companies Register there is also uncertainty with regard to the importance of shareholders agreements on consensus on materiel decisions. Because of the huge practical importance of this issue, it would be desirable if SKAT and the Companies Register found a common attitude to the question. The sooner the better.
Questions can be addressed to Hans-Henrik Nilausen at hhn@bdo.dk
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