Before the 2009 tax reform, investment via companies was one of the most profitable and frequently used investment methods, as profits from the sale of shares owned for more than 3 years were tax-free and dividends were taxed favorably. The 2009 tax reform focused on lower taxes on work in order to convince salary earners to make an extra effort on the labor market to increase the growth in Denmark. Among other things, the financing of lower taxes for salary earners resulted in increased taxation on share investment via companies. Based on the latest changes in the Danish Capital Gains Tax Act and current legislation in general, we have compared investments made in different delimited tax environment. The purpose of this master thesis is to analyze the affect of the tax environment on the investor’s choice when investing in shares. The thesis deals with investing with taxed and non-taxed funds and furthermore compares share investments on a personal level, via a company and via a pension scheme to disclose the tax environment, in which the investor obtains the highest personal profit after tax when investing with taxed funds, and in which the investor achieves the largest fortune after tax when investing with non-taxed funds. Furthermore, the thesis focuses on the special tax issues and considerations the investor should be aware of when investing in shares via a company. The comparisons of share investments in the three different tax environments are based on investment models illustrating the accumulation effect in the three tax environments, when considering the current tax legislation for share investment in each of the three tax environments. The models are based on an assumption that share investments in the company and pension scheme environments have better chances to accumulate fast, as the current dividend taxation is lower in these environments. It is investigated, how expectations for return on investments and the holding period are affecting the choice of investment. The thesis examines the role of the investment amount and how the annual percentage costs paid in the pension scheme environment also affect the choice of investment. Furthermore, the thesis analyzes how the choice of investment is affected by the investor’s marginal tax rate at the time of investment in and the time of withdrawal from a pension scheme. Finally, the thesis looks into the tax deferral element in connection with realization taxation, which results in a decrease of the efficient tax rate over time. Based on the described investigations we have learnt that there is no final, nor precise answer pointing out the tax environment, in which the investor should place his/her share investment in order to obtain the most favorable financial result, but that a qualified choice can be made depending on the investor’s own expectations in respect of return on investments, holding period and the present placing of the investment funds. However, a general recommendation is that the pension scheme environment is preferable when investing taxed funds, if the investor can plan his/her payments from the pension scheme to a lower tax rate than the deductible value. If this planning is not possible, the investor should invest on a personal level, as today’s financial market makes it difficult to imagine returns on investment and holding periods encouraging investments in the other two tax environments. If the funds are already available in a company, we recommend keeping the funds in the company and making the investment via the company.
|Educations||MSc in Auditing, (Graduate Programme) Final Thesis|
|Number of pages||152|