Joint taxation is atax scheme where several companies within the same group are taxed together asone entity. In Denmark it is mandatory to have joint taxation of companieswithin groups where the ownership share exceeds 50% or between companies withcontrolling influence.
Frequently Asked Questions About joint taxation
What is joint taxation?
Joint taxation means that several companies in a group are treated as one entity for corporation tax purposes.
Their taxable incomes are calculated together so that a loss in one company can be offset against a profit in another.
When is there an obligation for joint taxation?
There is an obligation for joint taxation when a Danish parent company has controlling influence over one or more Danish subsidiaries.
This is the case when the parent company directly or indirectly owns more than 50% of the share capital or voting rights in the subsidiary.
The joint taxation only applies to companies resident in Denmark and takes effect automatically from the time when the conditions are met.
It is not a choice, but a legal obligation under the Corporation Tax Act.
What is international joint taxation?
International joint taxation makes it possible to include foreign subsidiaries and permanent establishments.
The scheme can be advantageous if the group has foreign losses, but it involves:
- A 10-year binding period
- Risk of recapture taxation
- Increased administrative requirements and coordination across borders
Who is responsible for reporting and paying tax in a joint taxation?
The parent company (the administration company) handles reporting and payment of tax for the entire joint taxation group.
The administration company is liable both for its own tax and for the tax of the jointly taxed companies, and the liability is joint and several.
The other jointly taxed companies are secondarily liable for their own share of the tax.
How are advance tax payments handled in a joint taxation?
The administration company pays the on-account tax on behalf of the entire group.
The individual companies’ share of the on-account tax can be allocated internally in the group by agreement, but towards the Danish Tax Agency only the administration company is responsible.
Can companies be excluded from mandatory joint taxation?
As a starting point, companies cannot be excluded from joint taxation if the conditions for mandatory joint taxation are met.
When there is an obligation for joint taxation between Danish group companies with controlling influence, it is not possible to opt out individual companies.
The entire Danish group must be jointly taxed as one single entity.
Disclaimer
As the above is for guidance purposes only, we accept no liability for decisions that may be made based on the above without prior individual advice. We accept no liability for errors and omissions.