Article:

Tax-exempt transfer of businesses to commercial funds

25 January 2019

Anders Kiærskou , Manager, Tax |

A new political agreement ensures tax-exempt transfer of businesses to commercial funds.

The agreement has been concluded between the Danish government and several other political parties.

The parties agree to follow the recommendations of the Working Group on Succession to Commercial Funds for a new model for taxation of the transfer of businesses to commercial funds.

The model aims to make it more attractive to transfer companies to commercial funds and, thus, creates incentives for the establishment of more funds.

In the future, when a business owner transfers his business to a commercial fund – for example in connection with a generational change – at the time of the transfer, it will be tax-exempt for both the transferor and the fund.

The new tax model recommended by the Working Group on Succession to Commercial Funds implies that the transfer of shares to a commercial fund will be tax-exempt in its entirety at the time of the transfer.

However, the fund will still be taxed on any subsequent divestment of the received shares and/or upon receipt of dividends from the transferred company.

Specifically, a ceiling is set on the tax payable as a result of the transfer to the fund.

Only tax corresponding to the calculated and deferred tax on the transferor's profit on the transfer date with the addition of interest can be claimed.

However, this tax will only become fully or partially payable in connection with the fund's subsequent divestment of shares in the transferred company or by the fund's receipt of dividends from the transferred shares.

The new rules are expected to be adopted in 2019.

The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge. Please sign up here.