Succession: Focus on the fiscal aspects of the succession in a business case, in the context of the possible legislative intensions by the Social Democracy’ distention of financial justice.

Lars Thamdrup & Kim Theill

Student thesis: Master thesis

Abstract

This assignment is based on the Social Democracy' distention prior the election campaign in 2019. Their distention was to suggest several changes, hereby to restrict tax-free corporate transfer with higher succession charges and top taxation on capital income. Some of the most notable changes were in relation to the current gradual reduction of the tax rate on succession from 15 percentage to 5 percentage in 2020. In the Social Democracy’ opinion, the gradual reduction should be reversed, so the tax on succession regarding corporate transfer should be 15 percentage again. In addition, the distention suggest a change in taxation of capital income from 42 percentage to 45 percentage, along with a modified calculation of the inheritance tax from 15 percentage to 30 percentage of inheritance exceeding DKK 3 million kr. The context of this distention arise the purpose of this assignment, which is to enlighten the consequences of the above suggestions if adopted. A fictitious case company with a well-consolidated business model has been prepared for this analysis to generate the consequences. Given the gradual reduction of the tax rate on successions to 5 percentage in 2020, it has been an assumption that many companies have planned a generational change in 2020, and they are now to be affected by this revolution. The purpose of this assignment has therefore also focused on the possibilities of making the generational change in 2019, in order to gain advantage of the current lower tax-rate on successions. We have prepared five solutions, which all contribute to an understanding and focus on different perspectives. The analysis helped to illustrate how difficult it is for a well-consolidated company to get by with the planned changes. It is more troubling to imagine if a succession even is possible for companies with big debt as the tax charges grow. Ultimately, this can end poorly for those companies that are not able to finance this. The assignment concludes that it may not always be the most attractive solution to do a succession for a company, nor for entrusts or acquirers – especially not when the tax rate changes to 15 percentage. The cash flow consequences of the “rollback” effects may also cause an effect on the Danish macroeconomics with lesser job opportunities and hence a lower corporate taxes.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages132