Global Tax Alert | 4 December 2013

Denmark presents draft bill on dividend taxation of cash payments related to restructurings

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On 20 November 2013, the Danish Minister of Taxation presented a bill, L 81, which changes the taxation of cash amounts paid in connection with certain restructuring transactions. The purpose of the draft bill is to prevent taxable dividends from being transformed into cash payments treated as tax-exempt capital gains.

Tax-exempt restructurings

According to the bill, a cash payment should be treated as a dividend provided that the shareholder, subsequent to the restructuring, owns shares in the contributing or the receiving company or in a company affiliated with one of these companies. The taxation of the cash payments will depend on whether the shareholder fulfills the requirements for receiving tax-exempt dividends from the receiving company.

Taxable restructurings

According to the bill, remuneration in a form other than shares received in connection with a share-for-share exchange will be treated as a dividend provided that the receiving company is an “empty” company and that part of the remuneration consists of shares in the receiving company or in a company affiliated with the receiving company.

If the entire remuneration is in the form of cash, the entire remuneration should be treated as dividends provided that the investor owns shares in the receiving company or in the acquired company after the restructuring.

These rules do, however, not apply if the shareholders were entitled to receive tax-exempt dividends from the acquired company immediately prior to the transfer of shares.

Finally, remuneration consisting of something other than shares in the receiving company or companies affiliated with this company which is paid in connection with a taxable merger or a taxable demerger will also be treated as a dividend provided that the shareholder owns shares in the contributing or receiving company or in a company affiliated with one of these companies.

The new rules will have effect for transactions adopted after 20 November 2013.

For additional information with respect to this Alert, please contact the following:
Ernst & Young P/S, Copenhagen
  • Jens Wittendorff
    +45 5158 2820
    jens.wittendorff@dk.ey.com
  • Vicki From Jørgensen
    +45 5158 2632
    vicki.f.joergensen@dk.ey.com

EYG no. CM4014