Family Succession after February 5, 2015 - from a Tax Perspective: An Impact Study on the Tax Consequences on the Repeal of the 1982 Tax Circular, and Reduction in Gift Tax as an Alternative to the Restoration of the 1982 Tax Circular

Abstract

On the 5th of February 2015 the former government led by Prime Minister, Helle Thorning-Schmidt, repealed one of two tax circulars on valuation of unquoted shares for family members. The reason behind the repeal was that SKAT, the Danish Customs and Tax Administration, had drawn some undesirable use of this particular tax circular to the former government’s attention. This is due to the fact that the valuation of unquoted shares to family members based on this was below the market value in many cases. The National Tax Board found that based on this particular tax circular, there is a legal claim for family members to valuate unquoted shares in relation to family succession. After the repeal, unquoted shares are to be valuated according to the other tax circular or SKAT’s company guidance. In continuation of the parliamentary elections on June the 18th 2015, the current government led by Prime Minister, Lars Løkke Rasmusen, published the government platform, which was based on the restoration of the particular tax circular among other things, in order to improve the framework conditions for the family-owned companies in Denmark. During the public debate the following months after the elections, the government decided not to restore the tax circular but to reduce the gift tax from 15% in 2015 to 5% in 2020 instead, as family succession is considered a gift according to the Danish tax law. This thesis is formed as an impact study based on a fictional case, Plastbeholder A/S. The intention of this thesis is based on Plastbeholder A/S to conclude whether a reduction in gift tax is a good alternative to the restoration of the tax circular, in order for the government to improve framework conditions for the family-owned companies in Denmark. This thesis concludes that based on Plastbeholder A/S, the reduction of gift tax from 15% to 5% is a good alternative to the restoration of the tax circular, due to the fact that the total taxes in relation to family succession is lower.