Loans to Shareholders in Corporate Law and Tax Law: A Study of the Interpretation of Related Parties According to the Tax Law Provisions in Practice

Abstract

There has been focus on loans to shareholders and members of management, especially from the Danish Tax Authorities since 2012, where the legislation was tightened as prior to 2012 there had been an increasing number of such loans. In terms of tax law, illegal loans to shareholders were introduced with effect from loans given 14th august 2012 and subsequently. On the contrary, the corporate law rules were changed with effect from 1st January 2017, when illegal loans to shareholders were legalized. The first part of this Thesis will explain the legal framework of a loan to a shareholder both in accordance with the corporate law provisions and the tax law provisions including a description, analysis, and assessment of whether there is a difference between the two provisions. The first part will contain a theoretical part of the corporate law and tax law, which aims to inform and explain the relevant legislation. Afterwards there will be an analysis showing the similarities and differences between the two sets of provisions. The second part of this Thesis is about how related parties are interpreted in practice, from the perspective of the tax law provisions. The purpose is to examine whether there is a difference between the wording of the law and the interpretation of the related parties in practice. The analyze will be based on rulings from the Court and their interpretation in practice. Emphasis will be placed on the argumentation behind the decisions and which the factors that have an influence on the final decision. It has been concluded to the first part of this Thesis that there both are similarities and differences when comparing the two provisions. Situations may arise in practice where, according to the provisions of corporate law, an illegal loan to a shareholder occurs, while the loan according to the provisions of tax law are not included. There are also other terms which are interpreted differently, such as who is considered as an obligor and who is considered as a lender. These differences have arisen as a result of two provisions being introduced independently of each other. It has been concluded to the second part of this Thesis that there occurs a difference between the wording of the law and the interpretation in practice. There is a more extensive interpretation of related parties, than the one mentioned in tax law. It is an independent assessment whether a person is considered to be a related party. The argument that are consistent in the decisions are whether there is a connection of interest with a person and the main shareholder and whether the loan was granted solely because of the main shareholders influence in the company.