Kira Hartmeyer & Martin Olsen

Student thesis: Master thesis


A change of a group structure, generational change, splitting two activities, merger of two companies are just some of the reasons companies are choosing to do a restructuring. In the Danish tax legislation, the possibilities for a restructuring of companies are the four models: merger, demerger, contribution of assets and exchange of shares, and can be done as either a tax-free or a taxable transaction. The purpose of this thesis is to answer the problem statement why a tax-free restructuring is not always more advantageous than a taxable restructuring.
A taxable restructuring is the most simple way of doing a restructuring. The transaction will be seen as a sale of either the company/shares in a merger and exchange of share or a sale of the assets in the case of a demerger and contribution of assets. As the transactions are seen as a sale, the transferring part will be subject to taxation, which will mean the shareholders in a merger or an exchange of shares. In a demerger transaction, it is the transferring company that will be subject to tax, as well as in a contribution of assets.
The tax-free transactions are more complicated and subject to additional rules and limitations than the taxable transactions. A tax-free restructuring transaction can be done with approval from the Danish Tax Authorities and without an approval.
By a tax-free transaction with approval from the authorities, one of the main requirements are that the company has a business justification to do the restructuring. It is essential, that the reason for the restructuring is not tax evasion or tax avoidance. If the company fail to have a proper business justification, the Danish Tax Authorities are most likely to deny the tax-free transaction. The consequence hereof is that the transaction will now be considered a taxable transaction. Besides the business justification, each of the models have other specific rules to be adhered to, or the consequence will as well be that the transaction is considered taxable.
If the company instead wish to make a tax-free restructuring without approval from the authorities, the business justification will not be a requirement. Instead there will be other rules the company must adhere such as the holding requirement, to ensure that the purposes of the restructuring is not tax avoidance.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages114