Dansk exitbeskatning af selskaber og dets forenelighed med EU

Marc Tinggaard Frydendal

Student thesis: Master thesis


This master thesis concerns Danish legislation on exit taxation of companies and the compatibility of such taxation with the case law of the European Court of Justice (ECJ). As it stands that member states within the European Union (EU) are required to comply with the case law of the ECJ. It has been found that legislation that provides the means to perform exit taxation, violates the Freedom of Establishment according to article 49 in Treaty of the Functioning in the European Union (TFEU). In light of case C-371/10, C-38/10 and the case between the Danish State and the European Commission (C-261/11), where it was found that the Corporations Tax Act (CTA) §§ 5, subsection 7 and 8, subsection 4 did not comply with the Freedom of Establishment. In reaction to said cases, the Danish Tax Department have proposed and adopted law L91, which results in the introduction of CTA §§ 26-27. CTA §§ 26-27 gives corporations a choice between an immediate payment of exit tax and a deferred payment of the tax. The lack of the possibility to choose a deferred payment of exit tax was what was, deemed unsuitable to safeguard the interest of a balanced allocation of taxing powers, in the first place. The given changes in CTA §§ 26-27 is a step in the right direction, but not without criticism along its way. Various interested parties have made the point that despite the Danish State’s efforts to comply the Danish legislation with the case law of the ECJ, it fails in a matter of subjects. This master thesis have analyzed and discussed various aspects of CTA §§ 26-27 and concludes in accordance with the critics that especially three aspects of the new law is at fall. First of all the changes to the CTA does not account for a distinction between assets not intended to be disposed of and other assets. Secondly the deferral is limited to seven years maximum, with a contribution to the repayment each year by the earning income of the reallocated assets. And thirdly, the interest charged on the remaining deferred tax is consistent with the opportunity cost, for the lack of liquidity, in the Danish State. All of the above topics are, according to this master thesis, too excessive to make the Danish exit tax regime compatible with article 49 of the TFEU. In regarding to this, it is concluded that assets, which are not intended to be disposed of and other assets have different risk premiums bound to them. Furthermore, a repayment schedule on deferred exit tax, which includes the earning income of the reallocated assets verges to a situation with double taxation of a given income. In addition the repayment schedule requires a more dense administration than what was agreed upon by the ECJ. Lastly the interest charged should be based upon the actual risk of losing the exit tax of reallocated assets, and not express the opportunity cost for the Danish State. In conclusion, the changes to CTA fails to accommodate the case law set by the ECJ.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2014
Number of pages76