Fradragsret for udgifter til formueforvaltning samt sammenhængen mellem statsskatteloven § 4 og § 6

David L. B. Andersen

Student thesis: Master thesis

Abstract

The tax treatment of expenses for asset management has in recent years attracted much attention from advisors as well as from the tax authorities. The increasing interest probably owes to the fact that the present expenses of asset management are no longer insignificant expenses for account statements from the bank, deposit fees, etc. but now also comprise expenses for due diligence, corporate management by external consultants, market surveys as well as other types of advisory services for company transactions. The object of this thesis is to challenge and enlighten the tax authorities’ latest published precedent for tax deductibility for operating expenses as well as analysing and assessing the consequences of the practice development for minor asset management companies, including the overall influence on parent company deductibility. The inspiration and centre of attention of this thesis is the Symbion decision made by the Danish Supreme Court on 29 November 2011, and recently published under TfS2011.986. The Supreme Court decision provides a revolutionary view of the more than 100 year old basic rules of Danish tax law for operating expense deductibility. The Supreme Court bases its decision on the fact that there is a connection, according to the wording, between sections 4 and 6 of the Danish Central Government Tax Act, so that operating expense deductibility assumes that the expense has been applied for acquiring, securing and maintaining the taxable income. The final legal status for venture funds given by the Supreme Court seems to be good news for the deductibility assessment of management fee compared to the starting point of the Danish High Court. However, the very broad wording by the Supreme Court is deemed to be a high potential risk to industrial holding companies’ right of deduction. Future tax challenges are to be expected in order to more closely define how far-reaching the operating expense deductibility concept goes in 2011/12. The general terms are assessed to be bad news to industrial companies. Industrial companies whose sole purpose is to own subsidiary shares actually have no taxable income. However, it is to be assessed that the Ministry of Taxation cannot overrule long-term practice in the area for which reason it is to be thought that industrial holding companies can deduct the usual management expenses from the income statement. If the tax authorities decide to interpret the Supreme Court’s conclusion rigorously, then the parent company deductions are under pressure. Many holding companies should therefore consider optimising their company structure and internal invoicing procedures in order to ensure that the costs are reinvoiced to the right cost bearer. There is no doubt that TfS 2011.986 is only the first decision in a long line of decisions which have the purpose of mapping the taxable treatment of management fee. The future legal status should according to assessment be promoted through the courts in order to challenge the operating expense concept. The conclusion must be that the Supreme Court decision will have significance to the individual statement of the holding company’s taxable income for which reason small industrial holding companies should in future optimise their cost allocation as well as transfer pricing, etc. It is recommended that such analysis should include an analysis of the holding company’s income and expense structure as well as the Group’s overall structure for tax legal purposes. The conclusion is that the Supreme Court decision does not undermine previous practice, but it does reveal various unsettled issues of how far-reaching the decision is considered to be by the tax authorities. The distinction between operating expenses and establishment costs is for the tax authorities an eternal issue of definition based on the dynamic development on the tax area. The Supreme Court decision will undoubtedly lead to a number of cases where the tax authorities present their interpretation of the decision. Most companies will on more specific assessment probably be awarded an “all or nothing” solution where the company will either be granted full right of deduction or no right of deduction – if the company has tax liable as well as tax exempt income. The uncertain legal status and the revealed challenges for industrial holding companies, even the risk of significant corrections in future, must also be acknowledged by the tax authorities. Accordingly, the nuanced legal status is expected to result in submission of a steering signal. The tax authorities should critically acknowledge their view on the operating expense concept and the assumptions to be applied as basis for achieving full right of deduction in order to thereby strengthen the administrative practice and the law and order in the area. The focus of the tax ministry by taking this type of decisions to the Supreme Court with the claims made is assessed to be a lasting desire for transparency. A lasting restrictive practice in many ways seems to intensify the interpretation within tax law. In terms of tax politics, it is to be assumed that the highest degree of transparency is continuously sought by way of political transparency but also through transparency within the tax constellations.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2012
Number of pages97