National og international sambeskatning: En konsekvensanalyse af sambeskatningsreglerne

Michael Krømmelbein & Ronni Jeppesen

Student thesis: Master thesis


The purpose of this master thesis is to examine the existing legislation on mandatory joint taxation in both a national Danish, and an international perspective. Furthermore, the purpose is to assess the pros and cons of joint taxation. By using the knowledge that we obtain through the theses, we use a case study to examine the possibilities of efficient tax planning ex post. Through our case study, we are able to give our opinion on whether internationally joint taxation should be chosen or not? Our theses seeks to contribute to the literature by disentangling the existing legislation and the possibilities for efficient tax planning ex post including the liquidity benefits of jointly mandatorily taxation both nationally and internationally. First, we examine the definition of the factors that qualifies an individual company as a group company in Denmark. Section 31C of the Danish Corporate Tax Act states that a company is deemed a part of group if the parent company can control the subsidiary company. Thus, the conclusive point is whether the parent company has control rather than unit of capital. If a subsidiary company is subjugate to control from the parent company, the company does not have to pay its taxable income directly to the Danish tax authorities but instead to the parent company1. Then the income subject to taxation consist of the sum of taxable income from each company in the group. The principle applied in Denmark is a so-called territorial principle, which was adopted with the passing of law number 426 of July 6 2005. The territorial principle causes that entities in Denmark are subject to mandatory joint taxation. One of the benefits from mandatory joint taxation is that it is possible to apply and use deficits in some group companies to offset positive income from other group companies. Thus, it is possible to postpone the taxation. The government stated that multinational companies, on a deliberate basis, used this opportunity to plan and avoid taxation in Denmark. Based on this assumption bill 173 was passed. The primary aspects of the bill were the limitation on the use of tax losses and the re-entry of joint liability on corporate taxes. Regarding the limitation in the use of tax losses, the new rules are that companies can use DKK 7.500.000 to set off other companies’ positive taxable income. Of income exceeding DKK 7.500.000, it is only possible to reduce this income with 60%. Throughout our theses, we examine bill 173 thoroughly and concludes that the law did not aim the intended target companies. Thus, many other Danish companies are now suffering from the effects of bill 173 especially companies with assets that are subject to taxation on a notional basis. In the final part of our theses, we examine the legislation regarding international joint taxation. It is voluntary for the companies to choose international taxation, but when done, a global principle applies. The global principle causes that all company entities throughout the world must be enrolled in the joint taxation. This principle was passed due to the cherry picking problems that existed. Furthermore, a fixation of 10 years applies when choosing international joint taxation. This requirement causes the companies to ensure a long-term strategy to endure the consequences of their choices. Finally, we apply the rules of international joint taxation in a case study and discover that many requirements need to be met and many other aspects need to be taken into consideration such as tax rate, the structure of the group and the future strategy. As a final point, we conclude that it is not possible to make a general assessment on whether international joint taxation is a benefit or not. Other literature on the subject concludes that there are more disadvantages than benefits on choosing international joint taxation, thus international joint taxation should be deselected. However, our opinion is that international joint taxation also has many benefits that offsets the disadvantages. Hence, our theses distinguish itself from the other literature and thus contribute.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2014
Number of pages123