Succession of Companies: Analysis of the Legislative Matters in the Decrease of Taxation on Gifts

Kasper Dahl Pedersen

Student thesis: Master thesis

Abstract

This master thesis has focused on the tax related issues with a transfer of a business from one generation to the next. The Danish government has issued a new legislative matter, which has improved the possibilities of a business transfer amongst family members, including nephews and nieces in some instances. This thesis has prepared an analysis of the consequences of the new law, with the use of a fictional business case. The thesis has a preliminary theoretical description of all tax related matters, related to a generational change of a business, which is afterwards demonstrated in the fictional business case, for the company called Mutatio A/S. This composition is used to be able to answer: “How to optimize the transfer of business for Mutatio A/S with the tax and financial related possibilities and qualitative demands, based on the new legislative matters’ effect on the successor”. In order to analyze the effect of the new law, three scenarios has been prepared for the business case, all with different strengths and limitations. The candidates for being the successor is either the nephew or the close colleague for the seller. In scenario 1, a part of the company is given as a gift to the successor, while the others part is sold between the holding companies, at fair value corresponding to the capital demand from the seller. In scenario 2, the A/B-model is used where the payment for the shares in the company is paid in the form of advance dividend rights. In scenario 3, the seller sells all his shares in Mutatio A/S from his holding company to the successor’s holding company and afterwards creating a loan between the two holding companies. The loan is paid back with the futures earnings in Mutatio A/S. In order for the scenarios to be as comparable as possible, it has been the premise that the net fortune for the seller of the company is the same in all scenarios, hence analyzing on the effect on the successor. The result of the analysis shows that it is best to sell the company to the nephew with the use of model 1, due to the new law which has decreased the costs of a business transfer to a nephew significantly.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2018
Number of pages85
SupervisorsHenrik Nielsen