Prepayment of tax - companies(Taxwatch (Tax news in english))
10-02-2010 09:34
Af
Allan Christophersen
In 2010, Danish companies must make prepayments of tax in two equal installments on or before March 22 and November 22. Companies established before 1992 are under certain conditions exempted from prepayment.
There are 2 types of prepayment of tax. The ordinary prepayment of tax is calculated by the tax authorities and the voluntary prepayment of tax is calculated by the company. For group companies the tax is paid by the management company on behalf of the entire group.
Ordinary prepayment of tax
The ordinary prepayment of tax is calculated as 50 % of the average of the actual tax paid for the income years 2006, 2007 and 2008 or in other words 12.5% of the average income during these years. One half is paid in March and the other half in November.
If the company receives a refund of tax for the income year 2009, this amount is automatically deducted from the November 2010 payment. The November payment is also reduced by withholding tax on dividends received in income year 2009.
If the company expects a drop in income in 2010, the company may request the tax authorities for a reduction of the prepayment of tax. The request must be filed within 3 weeks after having received the payment details. Request for reduction of the November payment can be submitted until 15 October.
Voluntary prepayment of tax
If the ordinary prepayment of tax is insufficient to cover the final tax for the income year 2010, the company can make a voluntary payment thereby avoiding a non-deductible interest of 5.1%.
The company may choose between making the voluntary payment in March or in November. Voluntary payments in March are increased by 0.4% and voluntary payments in November are reduced by 0.4 %.
Cash management considerations
It may from a cash management perspective be a good idea to pay voluntary prepayments of tax in March or November depending on the actual interest level.
Residual tax for the income year 2010 is due on November 22, 2011 and will be added an interest of 5.1%. Excess tax is refunded November 22, 2011 and will be added an interest of 1.6%.
Based on this it can be calculated that voluntary prepayments of tax should be paid in March if the interest rate is less than 1.6 % per year and in November if the interest rate is more than 1.6 % but less than 6.2 % per year.
Therefore it can be concluded that as a main rule it will not be cost effective to pay voluntary prepayments in March 2010.
EU influence on capital gain legislation
A proposal has been presented to the Danish Parliament to secure that Danish taxation on gains and losses on bonds do not discriminate other EU countries. According to the existing rules gains on certain Danish bonds are tax exempted, but gains on similar EU bonds are not. According to the proposal all gains on bonds will be taxable in the future.
The proposal is relevant to private investors only and the new rules apply for bonds acquired January 27, 2010 or later.
As compensation for this more burdensome taxation on bonds the taxation on financial income as such will at the same time be reduced from 51,5 % to 42 % on a gliding scale until 2014.
Questions to this article can be directed to Allan Christophersen + 45 39 15 53 02 and email alc@bdo.dk
Til nyhedslisten