Contents

This section describes the impact on taxation of a negative basis of taxation.

 

The section covers

  • Those liable to taxation covered by the rule
  • Rule
  • Carryforward of negative tax
  • Disbursement upon termination
  • Transfer to another pension plan
  • Determining negative PAL tax for disbursement to Danish banks and pension providers

 

Those liable to taxation covered by the rule

Pension plan holders under Section 1(1) of PAL as well as pension providers covered by Section 1(2) of PAL are covered by Section 17(1) of PAL. Danish pension providers liable to taxation under Section 1(2), (1), (2), (7), (8) and (10) of PAL are also covered by Section 17(2) of PAL. See section A.1 Persons etc. and plans liable to taxation. See also section A.2, Pension providers liable to taxation.

 

Rule

If the taxable part of the basis of taxation is negative, a negative tax of 15 per cent must be calculated, corresponding to the rate in Section 2 of PAL. The negative tax can be deducted from the tax on yields from pension plan yields under PAL in the subsequent years of taxation. The deduction must take place in the first year of taxation where this is possible. See Section 17(1) of PAL.

 

►Danish pension providers liable to taxation can choose to receive disbursement of negative PAL tax. It is a condition that the negative PAL tax has not been deducted in the first five years of taxation after the year of taxation in which the negative PAL tax is calculated. See Section 17(2) of PAL. ◄

 

►The calculation method for the disbursement of the negative PAL tax after five years is set out in Section 17(3)-(5) of PAL.◄

Carryforward of negative tax

A negative basis of taxation is converted into a negative tax of 15 per cent. The negative tax can, without time limitation, be carried forward for offsetting in the taxes for subsequent years. The negative tax and not the negative basis of taxation can be carried forward. See the comments on Section 20 in L 10 of 28 November 2007.

 

In the case of negative tax for several years, the old tax is offset before the more recent tax. 

 

Disbursement upon termination

Upon the termination of a pension plan covered by Section 1(1) of PAL and the cessation of tax liability for those liable to taxation covered by Section 1(2) of PAL, negative tax which cannot be used for tax deductions in subsequent years of taxation will be disbursed to the plan or the pension provider liable to taxation, respectively. See Section 25(1) of PAL. See also section D.1.5, Payment of negative PAL tax upon termination (Section 25 of PAL).

 

Transfer to another pension plan

Transfer of a pension plan under Section 41 of PBL is not regarded as termination of the plan if the transfer takes place between two banks, two pension providers or within the same bank or pension provider. See Section 25(2) of PAL. See also section D.1.5, Payment of negative PAL tax upon termination (Section 25 of PAL).

 

►This means that the saver can carry forward the negative tax for offsetting in the new plan or the existing plan to which the plan is transferred.◄

 

A transfer under Section 41 of PBL is regarded as a termination of the pension plan if the transfer takes place between

  • a pension provider and a bank, or
  • two pension providers where the pension provider from which the transfer is made carries out a final calculation under Section 23(1) of PAL.

 

See Section 25(3) of PAL. 

Note

Negative tax cannot be offset between two taxpayers.

Thus, negative tax determined under Section 4 of PAL can, in the subsequent years of taxation, only be deducted from tax determined under Sections 7 or 8 of PAL. This also applies to negative tax determined under Sections 7 and 8 of PAL. This appears from the comments on Section 17(1) of L 10 of 28 November 2007.

 

Determining negative PAL tax for disbursement to Danish banks and pension providers

►Negative PAL tax not deducted in the first five years of taxation after the year of taxation in which the negative PAL tax is calculated can be disbursed. See Section 17(2) of PAL. ◄

 

Example

►The following simplified example can illustrate the determination of negative PAL tax for disbursement:◄

 

Year of taxation

Tax determined under Section 7

2010

- DKK 15m

2011

- DKK 5m

2012

+ DKK 5m

2013

+ DKK 4m

2014

- DKK 3m

2015

+ DKK 2m

 

►The balance for negative PAL tax to be carried forward to the 2016 year of taxation includes a remaining negative PAL tax concerning the 2010 year of taxation of DKK 4m (DKK 15m minus DKK 11m). The reason for this is that, out of a negative PAL tax of DKK 15m for the 2010 year of taxation, it has only been possible for the pension provider to utilise the DKK 11m (for 2012, 2013 and 2015) in the first five years of taxation. According to the provision, in 2016 the pension provider can receive disbursement of a negative tax of DKK 4m concerning the 2010 year of taxation provided that the condition set out in Section 17(3) of PAL is fulfilled. The negative PAL tax of DKK 4m disbursed in 2016 concerning the 2010 year of taxation cannot be carried forward after the disbursement for offsetting in the PAL tax for subsequent years of taxation.◄

 

►The negative PAL tax which can be disbursed is determined according to Section 17(3)-(5) of PAL.◄

 

Disbursement to persons liable to taxation under Section 1(2), Items 1, 2, 7 and 8 of PAL (Section 17(3) of PAL)

►Persons liable to taxation under Section 1(2), Items 1, 2, 7 and 8 can choose to receive disbursement of negative PAL tax under Section 17(2) of PAL. See section A.2 Pension providers liable to taxation.◄

 

►It is a condition, however, that the amount plus amounts previously disbursed under Section 17(2) of PAL do not exceed the sum of the following amounts:◄

  • the total tax under Section 7 of PAL paid in the previous years of taxation and
  • 15 per cent of a positive difference between

    ►a)      the equity plus the sum of the total collective bonus potential, non-allocated collective special bonus provisions and accumulated value adjustment determined as per 31 December 2009 reduced by the share which, as per 31 December 2009, is attributable to plans covered by Sections 15 and 16 of the former Danish Pension Investment Return Tax Act and reduced by the share which, as per 31 December 2009, is attributable to savings made before 1982, cf. Section 7 of the former Danish Pension Investment Return Tax Act, and ◄

    ►b)      the equity plus the sum of the total collective bonus potential, non-allocated collective special bonus provisions and accumulated value adjustment determined at the end of the year of taxation reduced by the share which, at the end of the year of taxation, is attributable to plans covered by Sections 15 and 16 of the former Danish Pension Investment Return Tax Act and reduced by the share which, at the end of the year of taxation, is attributable to savings made before 1982, cf. Section 7 of the former Danish Pension Investment Return Tax Act.◄

      Disbursement to persons liable to taxation under Section 1(2), Item 10 of PAL (Section 17(4) of PAL)

    ►Persons liable to taxation under Section 1(2), Item 10 of PAL can choose to receive disbursement of negative PAL tax under Section 17(2) of PAL. ◄

     

    ►The amount cannot exceed the sum of:◄

    • the total tax under Section 8 of PAL paid in the previous years of taxation and
    • 15 per cent of a positive difference between

    • a)    ►      the sum of the total collective bonus potential, non-allocated collective special bonus provisions and accumulated value adjustment determined as per 31 December 2009 reduced by the share which, as per 31 December 2009, is attributable to plans covered by Sections 15 and 16 of the former Danish Pension Investment Return Tax Act and reduced by the share which, as per 31 December 2009, is attributable to savings made before 1982, cf. Section 7 of the former Danish Pension Investment Return Tax Act and ◄

      b)   ►   the sum of the total collective bonus potential, non-allocated collective special bonus provisions and accumulated value adjustment determined at the end of the year of taxation reduced by the share which, at the end of the year of taxation, is attributable to plans covered by Sections 15 and 16 of the former Danish Pension Investment Return Tax Act and reduced by the share which, at the end of the year of taxation, is attributable to savings made before 1982, cf. Section 7 of the former Danish Pension Investment Return Tax Act. ◄

      Background

      ►The provision is intended to ensure that pension funds that are in operation when the rules enter into force receive disbursement of negative PAL tax in connection with a current or future discontinuation situation where the equity and non-allocated funds as a whole are reduced in order to ultimatively accrue to the pension savers or the policyholders.◄

       

      In the event of previous disbursement of negative PAL tax (Section 17(5) of PAL)

      ►

      When determining the total amounts paid during previous years of taxation, the pension provider must include negative tax previously disbursed under Section 17(2)-(4) of PAL. Negative tax corresponding to the amount disbursed under Section 17(2)-(4) of PAL cannot be carried forward according to the rules set out in Section 17(1) of PAL.

      ◄