Denmark has during the recent years experienced increased attention towards equity funds and their operating practices following a range of unprecedentedly large acquisitions as well as the impact of the Tax Reform of 2009. In February 2009 the Tax Commission published their recommendations for a tax reform entitled “Lower tax on labor” which, in addition to a harmonization of taxation on entities’ dividends and capital gains on shares, included diverse initiatives such as the repeal of the present tax relief on expenses for external lawyers and auditors. Based on these recommendations Minister for Taxation, Kristian Jensen, conducted a hearing on a proposal that altered the taxation of entities’ portfolio shares, reduced the tax relief of expenses for external counseling and introduced a specific taxation on shares owned by equity funds (carried interest). This resulted in the draft legislation L202 introduced by the Minister of Taxation on April 22 2009 which was subsequently passed in the Parliament as Law no. 525 of June 12 2009 (Harmonisering af selskabers aktie- og udbyttebeskatning m.v.). This set of measures was also known as the “Spring Package 2.0”. The tax reform has vast implications for equity funds and their investors. We will examine the present tax environment for equity funds in Denmark by analyzing past and recent tax measures against equity funds, including a scrutiny of Spring Package 2.0. An earlier intervention in 2006 had existing rules on transfer pricing as well as minimum requirements to the ratio between stockholder’s equity and debts extended to also cover equity funds, thus limiting their tax relief on interests. A follow-up in 2007 further limited the interest tax relief in order to preserve the tax revenue in Denmark. Next we examine the most recent measures against equity funds including the legislation on relations between investment trusts and equity funds and the Spring Package 2.0 where it is particularly relevant to equity funds. A considerably broader definition of investment trusts has now been applied, which means that a wide range of entities will in 2009 now qualify as such. We will go into detail with the following topics under Spring Package 2.0: Taxation on dividends and capital gains on shares Taxation shares owned by managing partners (carried interest) Protective measures against interposed holding companies. The development in the tax position of external counseling. The analysis of the above topics shows that the recent tax reform has been very alert to the taxation of equity funds’ profits and their available tax deductions. However, the process from the draft legislation to the law that was eventually passed also shows that there were opportunities for the equity funds and their trade association, DVCA, to exert their influence and weed out the most obvious flaws along the process. The Danish equity fund environment in 2010 is still characterized by a high level of political attention and nothing suggests that this is about to change within the near future.
|Educations||MSc in Auditing, (Graduate Programme) Final Thesis|
|Number of pages||131|