Virksomhedsordningen: Konsekvenser ved den nye lovændring

Henrik Røjel Smitt

Student thesis: Master thesis

Abstract

The purpose of this thesis is to determine the consequences of the passing of bill L200 in September 2014, which has effectively altered the way that The Danish Business Tax Scheme (Virksomhedsordningen) can be utilized. The bill is designed mainly to neutralize the economic advantages linked to the contribution of private debt into the company and the provision of company assets as collateral for debt outside the company. Arrangement no. 1 previously allowed self-employed persons to deduct the interest on private debt from company profits, thus increasing the value of the deduction compared to if the debt had been placed outside the company. Furthermore, it was possible to use temporarily taxed profits as down payments on private debt contributed. To eliminate these advantages a negative deposit account (indskudskonto) now means that a temporary taxation of company profits can no longer be applied until the balance on this account is again zero or positive. Lastly, the interest correction rate has been increased by 3% in order to reduce the advantages of a deduction in company profits. Arrangement no. 2 made it possible for self-employed persons to refrain from withdrawing cash from their company and instead provide company assets as collateral to take out a loan. The consequences of this arrangement results in taxation of the lowest value of either the market value of the debt or the value of the asset. As a transition rule, a triviality limit has been introduced which means that in cases where the numerical value of the two arrangements combined does not exceed DKK 500,000 the new regulation does not apply. The triviality limit does, however, seem to pose some lingual difficulties which could render it more open to interpretation than originally intended. The real problem of the amendment to The Danish Business Taxation Act (Virksomhedsskatteloven) is that although it definitely has made the arrangements that it seeks to neutralize significantly more unfavourable, the scope of the amendment is not limited to the specific areas of abuse. Self-employed persons, in some cases, risk being adversely affected by the new rules although abuse was never the intention. This is especially the case in respect to liquid collateral. As a paradox, it was found that even if the objective of the amendment is to deter self-employed persons from contributing private debt into the company, it has in some cases proven to be more beneficial, as opposed to the alternative of having company assets provided as collateral. Chances are that the new rules will cause self-employed persons to choose other company types in future. This is likely to be the case for newly started entrepreneurs.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2015
Number of pages101