Virksomhedsordningen Introduced in Law Number 992 of 16/09/2014

Kate Petersen & Jacob Vejdiksen

Student thesis: Master thesis

Abstract

This thesis is based upon privately owned Danish companies and the implications of “Virksomhedsordningen” for their future tax position. This legislation, which the Danish Parliament introduced in 2014, has far-reaching consequences for a lot of its users. “Virksomhedsordningen” offers privately owned companies the possibility to be taxed as if it were using the private limited company tax law. The Danish Parliament has been aware that some of its users were using the law contrary to its original purpose. The principal misuse of the law was found to be in cases whereby the owners of privately owned companies were using low-taxed company funds to settle private debts, thereby gaining the possibility to make higher deductions on private interest expenses. It has been estimated by the Danish Parliament that the size of the group using the law against its original purpose, consists of around 2.000 persons. The total number of privately owned companies using “Virksomhedsordningen” has been estimated at around 175.000. The Danish Parliament has met much criticism because privately owned companies feel that the government has changed a number of the fundamental principles of the law because only 1 % of companies using the law contrary to its original purpose. One of the biggest criticisms of the new law is that some of the taxation decisions that the owner of a private company has made, potentially several years ago, and which were legal according to the law prevailing at that time, could now make the benefits of the revised “Virksomhedsordning” useless, due to it no longer being the preferential option for an owner to use. This thesis therefore focuses on the aspects of the new rules, and discusses their problems. Has the Danish Parliament thought all the new laws and regulations through or have they been so keen on closing the misuse of “Virksomhedsordning”, which is estimated to only benefit a minority of its users, or have they cancelled out any potential benefits of the law for the vast majority? Are there any difficulties understanding the new rules and if so, what are they? How will the new rules affect an entrepreneur about to start a company if he / she knows that the use of “Virksomhedsordningen” in the first year of the company’s life renders the benefit of the application of “Virksomhedsordningen” useless in the future?

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages143