Behandling af ulovlige kapitalejerlån

Alice Gardalid

Student thesis: Master thesis

Abstract

For several years, shareholders have financed their spendings by borrowing money from their own company without any intention of ever repaying the loan. Historically, this could be done without major consequences, even if the loan has been and still is illegal under the Danish Companies Act. Based on an analysis of the scope of the problem carried out by FSR, the Danish Tax Authorities were motivated to find a way in which the incentive to withdraw money tax-free, instead of drawing salary or dividends, was eliminated, namely by introducing taxation of these illegal shareholder loans and thereby renaming them to “withdrawals without a repayment obligation” under the new section LL § 16 E. As a result of the renaming of a shareholder loan, some new issues have occurred that need to be clarified in practice. Not only are the new rules complicated and confusing but also they are inappropriate for the target audience because of the scope of the aspects that need to be assessed. In order to be able to present a solution to the new issues and thus get an overview of what applies in the Danish Company Act versus the new section LL § 16 E and audit purposes in this connection, this thesis seeks to make a theoretical analysis with a subsequent comparison of the two sets of rules and then identify the conflicts that need to be resolved in practice. The theoretical analysis has identified three basic conflicts that occurred between the two sets of rules: (1) A civil-legally loan does not exist tax-legally (2) The repayment of the loan (3) The reclassification of the loan to a “withdrawal without a repayment obligation” followed by taxation According to The Danish Companies Act there is a loan that must be remunerated and repaid, while after the new section LL § 16 E it is merely a withdrawal without a repayment obligation. The withdrawal should be taxed by the shareholder, with a qualified connection. A qualified connection is defined as ownership with controlling influence. The renaming of the loan to a withdrawal without a repayment obligation triggers the company’s duty to withhold taxes, according to the Act on Taxation at the Source and hence to the fact that the withdrawal is to be seen as a gross amount, the company will never be able to comply with the contents of the Act on Taxation at the Source concerning withholding taxes on time. Behandling af ulovlige kapitalejerlån To minimize the economic consequences of an illegal loan, the shareholder or the management must have a solid overview of a variety of laws and regulations. They must be able to make independent assessments in order to repair the loan during the financial year in order to avoid double taxation. Bear in mind, that the targeted audience for taxation of illegal loans is shareholders in the smaller companies in accounting class B, who stand for 98 % of the illegal loans, according to FSRs survey. Based upon the conclusion of my thesis, I therefore strongly recommend, that the Authorities get together in order to work out a common set of rules that are consistent with legislation in general. Furthermore, I urge my fellow students to follow up on this subject as practice develops and the Tax Authorities publish their guidelines on this matter. During the preparation of this thesis, I have had major challenges in collecting data in the form of interviews and opinions from the appropriate experts and the Tax Authorities. This thesis is therefore based on my assessments made on the basis of legislation, binding answers from the Tax Authorities, verdicts, knowledge, and articles that I have had available during the process.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2014
Number of pages96