Denmark: law proposal exempting capital gains on certain portfolio shares publishedSeptember 7, 2012
On 30 August 2012, the Ministry of Finance published a law proposal according to which, capital gains on portfolio shares would become tax exempt.
Details of the proposal, which is expected to facilitate SMEs to attract more venture capital, are summarized below.
Capital gains on portfolio shares are tax exempt if:
- The shares are non-listed
- The portfolio company is a Danish private limited company or a similar foreign company
- The annual average value of the portfolio company’s assets for accounting purposes does not consist of over 85% of listed shares. If a portfolio company has the controlling power in a non-listed company, the value of the assets of the portfolio company includes the assets owned by the controlled company corresponding to the shares in the controlled company.
The corresponding capital losses would not be tax deductible.
To avoid situations where portfolio shares are first sold and then, shortly after, acquired back again as an alternative to distributing (taxable) dividends, capital gains on portfolio shares are taxed as dividends if the shares are sold tax free and similar shares are acquired within six months of the sale.
This does not apply if the sale price is higher than the new acquisition price.
If adopted, the amendments enter into force from 1 January 2013.
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