Tax for majority shareholder covers the special tax rules that apply to persons who own a significant share (typically over 50%) of the shares in a company.
Majority shareholders may be taxed on their salary from the company and on dividends they receive. There are also special rules on taxation on availability.
Frequently Asked Questions About tax for majority shareholder
Who is considered a majority shareholder?
A majority shareholder is an individual or a company that directly or indirectly owns more than 25% of the share capital or controls more than 50% of the voting rights.
Why are there special rules for majority shareholders?
Majority shareholders often have controlling influence in the company and can dispose of the company’s funds in ways that have tax implications.
Therefore, special rules and increased control from the Danish Tax Agency have been introduced.
The focus is especially on transactions between the company and the majority shareholder, where the risk of conflict of interest is greatest.
The purpose is to ensure that majority shareholders do not obtain tax advantages by moving value between themselves and the company through their influence.
Why does the Danish Tax Agency have increased focus on majority shareholders?
Because majority shareholders can influence the company’s decisions, there is a risk that the company’s funds are used for personal purposes.
The Danish Tax Agency therefore has increased focus on, for example, private expenses paid by the company, transfers of assets between owner and company and shareholder loans.
How can a majority shareholder optimise their tax position?
A majority shareholder can optimise their tax position by planning the relationship between salary and dividends so that the total tax burden is minimised.
Optimisation can also be achieved by using the rules on capital income and placing dividends within the lower-rate threshold.
What is taxation on availability?
Taxation on availability means that a majority shareholder is taxed already on the possibility of using a company asset for private purposes, not only on actual use.
If the majority shareholder has access to the company’s car, holiday home or boat, the private availability is taxed under special rules, regardless of whether the asset is actually used or not.
What is hidden dividend?
Hidden dividend exists when a majority shareholder receives financial benefits from the company that are not paid out as ordinary dividends.
This can be the company paying private expenses, transferring assets at an underprice or granting loans without a real intention of repayment.
In such cases, the benefit is reclassified for tax purposes as dividend.
What are the rules when a majority shareholder lends money to their company?
When a majority shareholder lends money to their company, it must be on market terms.
If the loan is granted without interest or at an interest rate below market level, the Danish Tax Agency can make a correction under section 2 of the Danish Tax Assessment Act by setting a notional market interest (imputed interest).
The missing interest is considered a financial benefit for the company and is classified as taxable contribution.
For the majority shareholder, no deduction is granted for a missing interest income, as no actual payment has been received.
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.