Contents

This section describes:

  • Persons covered by the rule (Section 16(1) of PAL)
  • Determining yield
  • Determining gains and losses on a share (Section 16(2) of PAL)
  • Time of declaration (Section 16(3) of PAL)
  • Deductions for tax paid to a country other than Denmark and tax paid to the Faroe Islands or Greenland (Section 16(4) of PAL)
  • Reduction of and addition to the basis of taxation (Section 16(5) of PAL)
  • Shares in limited partnerships companies (Section 16(6) of PAL)

Persons covered by the rule (Section 16(1) of PAL)

Pension savers covered by Section 1(1) of PAL who have placed pension funds in separate custody accounts with banks in shares of limited partnerships are covered by the rule.

 

Determining yield

The yields from pension plan assets liable to taxation under PAL mentioned in Sections 12 or 13 of PBL, Section 11 A of PBL or Sections 15 A and 15 B, cf. Section 11 A, which are placed in a limited partnership are determined as the sum of the dividends from the share and the gains and losses from the share determined according to the rules in Section 16(2) of PAL, cf., however, (4) and (5).

 

Determining gains and losses on a share (Section 16(2) of PAL)

When determining gains or losses from a share in a limited partnership, for the purpose of inventory taxation under Section 15(3) at the beginning and end of the year of taxation, the higher of the following sums must be used

  • either the acquisition sum for the share or
  • the value of the share as per 30 October in the year of taxation.

The value of the share is fixed based on

  • the financial statements for the limited partnership or
  • as the sum of the value of the assets in the limited partnership.

If shares in limited companies or private limited companies are not listed on a regulated market or a multilateral trading facility, the value must, however, be determined as the book value of the company.

 

If the limited partnership's financial year is not 1 November to 30 October, the value of the share may be based on the most recently available financial statements as per 30 October.

 

If the share is acquired during the financial year, gains and losses are determined as the difference between the value of the share on 30 October or at the end of the financial year and the acquisition sum of the share. This means that the value at the end of the financial year should be used if the financial year does not run from 1 November to 30 October.

 

If the share is disposed of during the financial year, gains and losses are determined as the difference between the consideration for the share and the value of the share on 1 November or at the beginning of the financial year.

 

If the share is acquired and disposed of in the same year, gains and losses are determined as the difference between the consideration and acquisition sum for the share.

 

Time of declaration (Section 16(3) of PAL)

The person liable to taxation must by 1 December each year at the latest provide the bank with information on dividends as well as gains and losses for use for taxation under PAL.

 

Deductions for tax paid to a country other than Denmark and tax paid to the Faroe Islands or Greenland (Section 16(4) of PAL)

If the tax paid to a country other than Denmark or to the Faroe Islands or Greenland has been added to the basis of taxation under Section 16(1) of PAL, the person liable to taxation can deduct the tax paid under Section 20 of PAL.

 

It is a condition that the person liable to taxation determines deductible tax under Section 20 of PAL for all income from the same country.

 

See section C.3.4.1, Relief for double taxation

 

Reduction of and addition to the basis of taxation (Section 16(5) of PAL)

The basis of taxation under Section 16(1) of PAL is reduced by a proportional amount of the increase in the value of the share in the limited partnership which corresponds to the non-deductible expenses of the person liable to taxation. The reason for this is that it can be attributed to transactions between the person liable to taxation and the limited partnership.

 

To the basis of taxation under Section 16(1) of PAL is added a relatively large part of the reduction in the value of the share in the limited partnership which corresponds to the tax-free income of the person liable to taxation. The reason for this is that they can be attributed to transactions between the person liable to taxation and the limited partnership.

 

Background

Among other things, Section 16(5) of PAL ensures that the person liable to taxation, by granting a loan to the limited partnership, does not obtain indirect deductions for the interest expenditure which the limited partnership pays to the pension provider because the interest expenditure which the limited partnership has paid to the person liable to taxation has reduced the value of the share at the end of the year of taxation.

 

This provision prevents asymmetry in the treatment of interest expenditure and interest income as the interest income is tax-free for the person liable to taxation because the limited partnership, with the exception of the determination of the basis of taxation under Section 16(1) of PAL, is considered to be transparent for tax purposes.

 

If the person liable to taxation has granted a loan to the limited partnership, the person liable to taxation is thus obliged to add a sum corresponding to a proportional part of the tax-free interest income to the basis of taxation under Section 15(1) of PAL.

 

Shares in limited partnership companies (Section 16(6) of PAL)

The rules in Section 16(4) and (5) of PAL also apply to pension savings placed in shares in limited partnership companies.