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tax:watch 6/2009(Taxwatch (Tax news in english)) 

Request for refund of excess corporation tax

During the present financial crisis, cash flow difficulties are a well known issue for many businesses. Recently, the Parliament adopted bill L 154 on temporary postponement of the due dates for VAT and payroll tax. We referred to bill L 154 in TW 2009.4.
 
Excess corporation tax for the income year 2008 is automatically refunded on 20 November 2009. However, the legislation already contains possibilities to obtain a quicker refund of tax claims than this.
 
If the corporation can substantiate that it would be disadvantageous to wait until the ordinary payment time, refund may under certain circumstances take place earlier.
 
The disadvantage of having the excess corporation tax refunded before the ordinary payment time is that the corporation will not receive the tax exempt compensation which for the income year 2008 amounts to 2,8 % of the excess tax. Furthermore, the supplement of 0,7 % of voluntary payment on account in March 2008 is lost.
 
A request for an early refund of excess tax must be submitted to the local tax authorities before the deadline for submission of the corporation’s tax return expires.
 
In practice, the tax authorities will not put forward considerable requirements in order for the corporation to obtain an earlier refund of excess tax. Substantiation of the disadvantage of having to wait for the tax refund can e.g. be a copy of the accounts, a trial balance or an explanation of the corporation’s expectation of a negative taxable income.
 
Corporations that use the calendar year as accounting year can apply for a refund until June 30 this year. For corporation’s whose accounting year terminated on 30 June, 2008 the dead line for application is as a main rule expired. However, under certain circumstances the central tax authorities may deal with an application anyway. According to our information, if the corporation substantiates its cash flow problems, the tax authorities would be willing to deal with an application.  
 
Questions to this article can be directed to Hans-Henrik Nilausen at HHN@bdo.dk

Amendments to the corporate income taxation

By adopting bill L 23 on February the 5th, the Danish Parliament made several adjustments to and/or clarifications to the corporate income taxation in Denmark.
 
The most important changes are:

• Clarification of the principle of territorial taxation of companies and other legal persons, whereas income from foreign sources previously were taxed in Denmark, if Denmark had the right to tax such income according to the relevant tax treaty. After the amendment, income from foreign sources is only taxed in Denmark if the country of source declines taxation of said income.

• Unless dividends distributed from a foreign subsidiary to a Danish company are covered by the parent/subsidiary, Danish companies can no longer receive dividends from foreign subsidiaries tax exempt if the foreign subsidiary can deduct the distributed dividends according to foreign tax law.

• Dividends distributed from subsidiaries situated outside the EU and from a country without a tax treaty with Denmark will only be tax exempt, if the Danish parent company has decisive influence over the subsidiary for at least one year and the dividends are distributed within this period.

• A number of changes regarding rules on limitation of interest deduction, CFC-taxation, inter-group transferrals of intangible assets, and the definition of transparent entities have also been made.

One change implemented by bill L 23 applies to natural persons as well as to legal persons:

• The definition of so-called investment companies has been changed. Investment companies will as a general rule include companies with more than 7 investors and where more than 85 % of the total assets are invested in securities. Investors in such companies will be taxed of income stated at the market value on the balance sheet date, instead of income stated at the date of realization of the shares.

Questions to this article can be directed to Lone Løschenkohl at LHL@bdo.dk