Shareholder Loan: Tax and Company Law

Maria Werner Larsen & Nicolai Toftegaard Brylle

Student thesis: Master thesis

Abstract

Shareholder loans are subject to regulation within both company law and tax law. With an overall vision of making it more appealing to establish and run a business in Denmark, Danish company law regarding shareholder loans are eased with effect from 1 January 2017. With this change in Danish company law, it is now possible to issue a loan from a company to its shareholders legally. On the contrary, in August 2012 The Danish Parliament adopted a tightening of Danish tax law regarding shareholder loans.
The main theme of the thesis is this contradiction between the development in company law and tax law regarding shareholder loans. Through the thesis, we will examine the differences between company and tax law. In order to do so, we will examine the regulation of shareholder loans as within company and tax law respectively, how the two sets of rules interact and how shareholder loans are treated in practice.
Our analysis shows us differences in the treatment of shareholder loans within company law and tax law, and to what extent the two sets of rules encourages shareholder loans. Moreover, our findings show us slight differences in the way company legislation and tax legislation use identical language. By examining case law of shareholder loans, we also find that since the adoption of taxing shareholder loans, the Danish tax authorities are interpreting the law beyond the wording of the law. There are however not yet any court judgements on this issue, so we will have to wait and see whether their view on this matter is the same as ours.
Another issue raised against the tax legislation, is the risk of shareholders being subject to double taxation. In our comparative analysis, we find that the solution to this issue suggested by the Danish tax authorities is not compatible with the current company law.
Danish tax legislation, taxing loans from a limited company issued to a shareholder with controlling interest, applies to loans issued from foreign limited companies to Danish shareholders as well. Consequently, the Danish tax legislation exposes itself to the risk of being tried against article 49 and 63 TFEU regarding freedom of establishment and free movement of capital respectively. In the thesis we try to answer whether the Danish tax legislation is an unjustified restriction against these articles in The Treaty of Lisbon.
We conclude that Danish tax legislation regarding shareholder loans, may well by a restriction on the right of establishment. Moreover, the Court of Justice has been reluctant to approve measures regarding direct taxes, generally finding them disproportionate compared to the purpose of the law

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2017
Number of pages120
SupervisorsSøren Friis Hansen