Joint Taxation in Denmark: a Theoretical Analysis of the Current Joint Taxation Rules

Louise Faurskov Andersen

Student thesis: Master thesis

Abstract

In Denmark, joint taxation is mandatory to all group enterprises who has a Danish taxable income. There are two types of joint taxation in Denmark, national and international joint taxation, and both are regulated by ยงยง31-31C in the corporate tax law (Selskabsskatteloven). The national joint taxation is based on a territorial principle which means, that all income related to Denmark in form of Danish corporations, properties etc. must be taxed due to the Danish rules. One of the main purposes with the rules of national joint taxation is, that the taxation is neutral for the individual corporations, meaning that no corporation is better or worse off due to the joint taxation. One of the benefits of joint taxation is that deficits can be used across the group. In contrast to the mandatory national joint taxation, international group enterprises have the option to choose the international joint taxation rules instead. The international joint taxation lets the group enterprises include foreign income when calculating the taxable Danish income, and this can be an advantage as this means, that also foreign deficits can be included and thereby the taxable income is minimized. There are a lot of rules in relation to joint taxation, but most of them are common for the two types. First of all, the regulation states that the taxable income must be calculated as if the group was one entity, based on the usual Danish rules of taxable income for corporations. When establishing the joint taxation, there must be appointed an administrating entity, which is the one who has the contact to Skatteforvaltningen, and it is also the administrating entity that administrates payments to and from Skatteforvaltningen in relation to corporate tax, voluntary payments and so on. Usually the mother company is appointed administrator. Another rule is that all of the entities in the group of joint taxation must have identical income years. That means that new corporations must change their income year when joining the group. There are a number of further rules regarding joint taxation, which are described in this thesis. Chapter 4 in this thesis shows how the rules of joint taxation are used on a fictive case-study. There are made a number of calculations in relation to taxation, both with national and international joint taxation as well as individual taxation. The conclusion of the calculations and illustrations is, that for the fictive case-study it is clear, that the joint taxation is an advantage whether it is national or international, since there are deficits to be used across the group. If there had not been deficits, none of the corporations would be better or worse off due to the joint taxation, in accordance with the principle of neutrality that the rules are based upon

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages124