In 1999, significantly tightened rules were introduced on the submission of documents to the tax authorities in connection with tax-free business transformation. Under section 2 (1) (6), it was a condition for the conversion to take place tax-free that:
- The owner shall submit a copy of the documents to be submitted to the Danish Tax Agency within one month of the conversion to the Tax Appraisal Authority.
The tightening of the submission frieze and the consequences of exceeding the deadline came to the rear of many.
SkatteInform focused on the problem by pointing out the unreasonableness of
- the short deadline
- the lack of exemption options;
- the serious consequences that the conversion became taxable.
Content of the law
The law contains two main elements.
- A general provision that the Minister of Taxation may disregard exceeding the one month time limit in paragraph 1 (6). “
- A transitional provision whereby, for conversions taking place between 1 July 1999 and 31 May 2001, the documents shall be deemed to have been submitted in a timely manner if they have been submitted to the tax assessment authority of the owner by 1 July 2001 at the latest.
Conditions for exemption
The law does not specify when a waiver may be granted. However, the comments to the draft law set out a number of factors which could be emphasised in the application for a derogation.
Among other things, attention should be paid to
- whether the sanction meets the objective of the time limit;
- in the case of a short-term overrun of the deadline
- whether the deadline may be due to 'speculation' in the development of the company's income;
- in the event of excusable circumstances such as sudden illness of the owner or his counsellors
- whether the owner has the opportunity under company law to reverse his decision to transfer the business to a newly formed company.
To the last point, it is stated that the transfer is legally binding when the Danish Enterprise and Company Agency has registered the company. If the documents are submitted to the Danish Enterprise and Company Authority later than one month after the expiry of the one-month period, this will preclude a waiver. On the other hand, it does not in itself preclude exemption if the documents are not received by the tax authorities until a few months after the deadline, if they have been submitted to the Danish Trade and Companies Authority.
Clarifications of the law
In connection with the consideration of the draft law, SkatteInform has requested clarification as to which municipality the documents were to be sent and who has the burden of proof that the documents are also received by the tax authorities.
The Minister of Taxation has replied that the documents must be submitted to the municipality where the taxpayer is registered in advance.
In addition, the Minister of Taxation considers that the documents must be received by the tax authorities. Since it can have disastrous consequences for the owner of the business, if for some reason the documents do not arrive, consideration should be given to requiring a receipt from the tax authorities for the receipt.
Authority
The authority to grant the dipensation will be delegated to the municipal tax authorities.
Disclaimer
The above information is for guidance purposes only, and we accept no responsibility for decisions made based on this information without prior individual advice. We accept no responsibility for errors or omissions.
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