Is a Favor Between Friends a Real Problem when it Comes to Undeclared Work?

Pi Kristoffersen

Student thesis: Master thesis


Is a favor between friends a real problem in Denmark when talking about undeclared work? Should we do something about it? We are in a grey area, where people may have different opinions about whether a favor between friends can be problematic or not. Afterall, what is the problem, really, when it comes to a friendly favor? Socially there is no problem, but looking at it from a fiscal perspective, it can become a problem. In 2002 the Ministry of Taxation formed a committee, to elucidate the need for legislation in the area of tax-free and taxable favors between friends. It was deemed that the need wasn’t there. In 2012 came the first legislative about friendly favors – Ligningslovens § 7 Å. The legislation clarifies when we are talking about a tax-free favor and a taxable favor. The criteria for the assessment are mainly based on the personal relationships of those involved, whether compensation is received, and what the extent and nature of said compensation is. The assessment of whether a friendly favor is tax-free or not, raises a lot of theoretical questions. However, these questions are not illuminated in neither the legislation, the remarks for the law or in the report from 2002. Some matters are theoretically unclear but are clarified in practice. However, not all my questions regarding the theory are answered this way. A clarification could be created by providing some amount limits, from which an assessment could be based on. Some trivial limits regarding when it is significant to look at, and when a favor has a duration that exceeds what must be considered insignificant. The assignment provides examples and suggestions for the desired clarification, as well as clarity of the law and the opportunity to avoid taxation between family members by giving a gift. Ligningsloven § 7 Å has not been tested in practice. Could this not indicate, that we are not dealing with a problem? It could indicate that the law has not lived up to the clarity, that was needed to enact it.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2020
Number of pages120