Tax reform - corporate share investment(Taxwatch (Tax news in english))
06-05-2009 13:03
Af
Lone Løschenkohl
The new rules will have effect as of 2010.
One of the most important changes is the abolition of the so called 3 year rule according to which companies are tax exempt on gains on shares after 3 years holding.
The bill will instead introduce a distinction between shares in group related companies, where the company owns at least 10% of the share capital, and portfolio shares where the shareholding is less than 10%. Shares in group related companies will as a general rule be tax exempt and losses on these shares will likewise not be deductible, whereas gains and losses on portfolio shares always will be included in the taxable income.
In-between holding companies
An important exemption to the above mentioned taxation of shares in group related companies are shares in so-called in-between holding companies, where gains and losses will be relevant for computing the taxable income despite of a holding of 10% or more. In-between holding companies are defined as companies where the principal function is to own shares in subsidiaries, where there is no substantial economical activities regarding the shareholding and where more than 50% of the shares of the in-between holding company are owned directly or indirectly by companies that would not meet the requirement of 10% shareholding for tax exemption of subsidiaries by direct ownership.
Portfolio shares
Gains and losses on portfolio shares will as a general rule be computed on basis of the market value of the balance sheet date.
As taxation of capital gains on shares traditionally is based on the realization principle, there has been a lot of objections to this suggested change of principle. Therefore, the bill includes an option for owners of unquoted shares to choose taxation according to the realization principle.
However, the price for choosing taxation according to that principle will be no deduction of losses in other kind of income. The deduction will in other words be limited to income from similar sources if the realization principle is chosen.
Transition rules
As this bill includes dramatic changes of the Danish regulations on taxation of corporate share holdings, the bill includes a comprehensive transition system, which basically sums up to the conclusion, that it should tax wise make no fundamental difference whether gains or losses on shares are realized before 2010, i.e. before the rules suggested in this bill will be effective .
Questions to this article can be directed to Lone Løschenkohl at
lhl@bdo.dk
Read tax:watch here
Til nyhedslisten