Investments in private equity are becoming more widespread as a result of previously portrayed high return on investments, and generally, private equity has a low correlation with typical investments assets. Hence, it can be used to diversify the investment and lower the risk profile on investment portfolios. A way to invest in private equity is through capital funds, which are often structured as tax transparent limited partnerships that are managed by an Investment Managers. The Danish taxation on dividend yield is dependent on the investors having a permanent establishment in Denmark. The investors will have a permanent establishment if a dependent agent is present in the source country. The Danish agent rule is based on the OECD model tax convention since the Danish permanent establishment regulation is interpreted according to the OECD model tax convention art. 5. Since ultimo 2017, two new regulations have affected the agent rule: a national change in the definition of “business” and the change of the model tax convention as a result of BEPS. The legal analysis aims to determine the cases where an Investment Manager will constitute a dependent agent after the agent rule. The economic part seeks to analyse whether the Danish regulation is optimal from a Danish national economic perspective. The economic analysis examines the design of the regulation through two analyses. The first analysis examines the regulation in terms of precision, whereas the second identifies whether the Danish capital taxation is optimal. The findings show that the new regulations significantly change the permanent establishment regulation. However, in relation to Danish capital fund structures, the changes do not have a major impact on foreign investors, as they are still not obtaining permanent establishment in Denmark through investments in Danish private equity through a capital fund administered by a Danish Investor Manager, assuming the capital fund structures remain the same. The findings of the economic analysis show that there is de facto capital taxation at company level, which is consistent with the findings of the model of optimal taxation on short term. In the long term, the taxation of capital is discussed in relation to the aspects making it possible for countries to maintain capital taxations. The economic analysis also determines a formula for when it is efficient for Denmark to invest the additional costs involved in formulating the regulation as a precise rule compared to an imprecise standard.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||92|
|Supervisors||Peter Koerver Schmidt|