Contents
The section covers
Rule
If the tax under PAL does not exceed the deduction for foreign tax under Section 20(1) of PAL, the person liable to taxation can carry forward tax paid to a country other than Denmark, Greenland or the Faroe Islands which cannot be deducted from the tax for the year, together with any negative tax under PAL. The amount which can be carried forward is determined under Section 20(1) of PAL as the lower of:
- The tax paid to a country other than Denmark, Greenland or the Faroe Islands, and
- The PAL tax levied on the positive foreign basis of taxation eligible for relief.
This means that the amount of foreign tax for which relief can be granted under Section 20(1) of PAL can be carried forward if the basis of taxation under PAL is too small to allow for full or partial relief.
Condition for carryforward
It must be documented that no relief has been granted for foreign tax on the same income at company level or to the pension plan holder in question. See Section 20(3), last item
Example
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|
Year 1 |
|
|
Basis of taxation (15%) |
|
|
Type of income |
Amount |
|
|
Income from sources in Denmark: |
|
|
|
Gains, bonds |
2,000 |
|
|
Interest, bonds |
3,000 |
|
|
Dividend, shares |
2,000 |
|
|
Income from sources abroad: |
|
|
|
Losses, shares |
- 17,000 |
|
|
Basis of taxation before Section 10 of PAL |
- 10,000 |
|
|
Transitional deduction under Section 10 of PAL, determined at 1/10 of the basis |
2,000 |
|
|
Basis of taxation under Section 10 of PAL |
-8,000 |
|
|
15% tax |
- 1,200 |
|
|
Year 2 |
|
|
Basis of taxation (15%) |
|
|
Type of income |
Amount |
Income taxed abroad |
|
Income from sources in Denmark: |
|
|
|
Losses, bonds |
- 27,000 |
|
|
Interest, bonds |
2,000 |
|
|
Income from sources abroad: |
|
|
|
Interest, bonds |
3,000 |
0 |
|
Gains, disposal of real property |
10,000 |
10,000 |
|
Gains, shares |
8,000 |
0 |
|
Basis of taxation before Section 10 of PAL |
- 4,000 |
10,000 |
|
Transitional deduction under Section 10 of PAL, determined at 1/10 of the basis |
400 |
-1,000 |
|
Basis of taxation under Section 10 of PAL |
-3,600 |
9,000 |
|
15% tax |
- 540 |
1,350 |
The gains in year 2 from the disposal of the foreign real property, an amount of 10,000, are comprised by the double taxation relief under Section 20(1) of PAL.
The foreign interest income of 3,000 and the gains on shares of 8,000 have not been taxed abroad, and this income is thus not covered by the relief provision set out in Section 20(1) of PAL.
As the basis of taxation in Denmark is negative, no PAL tax relief can be granted for the tax paid abroad. Under Section 20(3) of PAL, the person liable to taxation can carry forward the negative tax to subsequent years of taxation.
The amount which can be carried forward is determined as the lower of
- 1,000 (10% of 10,000, the tax paid to a country other than Denmark, Greenland or the Faroe Islands), and
- 1,350 (15% of 9,000, the Danish tax on the positive foreign basis of taxation eligible for relief).