The Danish Exit Tax Legislation for Individuals in an EU Perspective

Hakkan Turan

Student thesis: Master thesis


This master thesis concerns the Danish exit taxation legislation, regarding assets for individuals compared to case law in ECJ (The European Court of Justice).
With its membership in the European Union, Denmark is obligated to make sure that national legislation does not hinder the internal market in the European Union i.e. ensure the free movement of goods, persons, services and capital cf. TEUF Art. 26 (2).
In C-261/11 Commission vs. Denmark, the ECJ found that the Danish exit taxation rules for companies where in breach with TEUF art. 49 freedom of establishment. The decision resulted in changes in the Danish exit taxation legislation for companies cf. LFF 2013-12-04 nr. 91. The exit tax legislation for individuals were at that point of time similar to the rules about companies and as a consequence of C-261/11 Commission vs. Denmark, the legislation for individuals were also changed cf. LFF 2014-12-17 nr. 98. The new rules is now based on a postponed tax principle (henstandsordning) cf. KSL ยงยง73B and 73C which means that the individuals can choose to either i) pay the calculated exit tax or ii) postpone the calculated exit tax up to seven years. The Danish henstandsordning is not unconditional and the thesis analyses these conditions according to case law in ECJ and concludes that there are some elements of the Danish henstandsordning that seems unproportionate according to EU-legislation.
From an economic perspective, the thesis analyses incentives for the individual to choose and follow the henstandsordning. The principal-agent theory is used to understand the relationship of the individual and the legislator (Denmark). The Informativeness principle, The Incentive principle and The Monitoring Principle (Milgrom and Roberts: 1992) is used to understand the Danish exit tax legislation from a Principal-Agent theoretical perspective. This part of the master thesis concludes that the Danish henstandsordning contains elements that creates incentives for the individual to follow the process.
Finally, the thesis discusses room for improvements and a possible addition to the current legislation is suggested.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2017
Number of pages71
SupervisorsMichael Tell