National Joint Taxation

Brian Boj Clausen & Louise Hansen

Student thesis: Master thesis


Our purpose with this thesis is to analyze the current rules on mandatory joint taxation along with the upcoming rules associated with permanent establishment from a Danish perspective. In Denmark group companies should be a part of the mandatory joint taxation. The conditions regarding this are listed in section 31 C of the Danish Corporate Tax Act. Here it is determined that, to be qualified as a group company is not based on the ownership in percentage, but based on the fact whether the parent company has control over the subsidiary company. The statement of the income of the mandatory joint taxation is based on a global income principle. This means that all incomes earned in Denmark should be taxed in Denmark, this is called the territorial principle, which are stated in the Danish Corporate Tax Act paragraph 2, section 8. The territorial principle states that income earned by a Danish company abroad through a permanent establishment or real estate shall not be assessable income for taxation purposes. In the group companies there should be a elected an administration company. This is typically the parent company. The parent company are liable to settle all taxes to the tax authorities on behalf of the group. As a result of that the administration company is liable to collect and refund taxes from the subsidiary company. However this does not mean that it is only the administration company that is liable for the taxes. Since 2012 companies which are a part of the mandatory joint taxation are jointly and severally liable for the total corporation tax, withholding tax on interest, royalties and dividends. As something new on the subject, there is a new legislation on the agenda, which are made based on the EU-judgment, regarding group companies’ possibility to deduct deficits from permanent establishments. Due to the fact of differences between the Danish law and the EU-judgement, it was recommended from the EU court that the Danish law should be changed so that it was consistent with the rules of EU. This will have the effect that it will be possible to deduct a final deficit from abroad if this could not be used in the source country. This gives an uncertainty on whether it would be attractive for group companies to choose international joint taxation cf. 31 A of the Danish Corporate Tax Act, due to the fact that according to the law a company can now choose to close the permanent establishment to use the deficit

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2019
Number of pages113