Succession

Tax succession

What does it mean to succeed for tax purposes?

With tax succession, it is possible to transfer assets from one owner to a new owner without paying tax at the time of transfer. The tax liability is taken over by the buyer.

Tax succession is often used in connection with succession planning (generational transfer) in businesses. In this way, part of the purchase price can be financed by the buyer taking over the tax liability. As a result, the buyer needs to raise less funding to finance the purchase price of the business.

The disadvantage for the buyer is that they take over a tax liability that must be paid at a later point in time.

The group of persons who can choose tax succession

Succession can take place when transferring to persons who are fully tax liable in Denmark:

• Children, grandchildren, siblings, siblings’ children, siblings’ grandchildren, and cohabitants, as well as adopted children and stepchildren.
• In addition, under certain conditions, succession can take place to close employees, former employees and former owners.

When can tax succession be used?

• Transfer of a personally owned business, including agriculture, during lifetime (or shares thereof).
• Distribution of shares and certain assets from an estate.
• Transfer of shares in companies.
• Succession planning between family members, e.g. parents to children.

Requirements for succession

• The business must constitute a trading/business activity at the time of transfer.
• Succession can be applied to all businesses or to one of several businesses.
• Succession can be applied to ideal shares of businesses.
• Succession can only be applied to certain assets.
• An agreement must be entered into between buyer and seller regarding succession, which must be reported to the Danish Tax Agency within the deadline in the Danish Tax Control Act section 2 (the reporting deadline).

Contact us today

SkatteInform can help with these rules and the conditions for using them. We can also help assess whether the rules may be useful in your situation—so contact SkatteInform. You can also contact us via the contact form below.

Disclaimer

As the above is for guidance only, we do not accept liability for dispositions that may be made on the basis of the above without prior individual advice. We do not accept liability for errors and omissions above.

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