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On 1 June 2018, the Danish parliament adopted a bill amending the Danish Merger Tax Act (fusionsskatteloven) as regards the merger date of tax-exempt cross-border mergers. The bill is relevant to cross-border mergers in which the recipient company is located abroad.
Under current legislation, it is in general possible to carry out a taxexempt cross-border merger with retroactive effect. However, this does not apply to a participating company that joins or exits a group relationship to the effect that the company joins or exits a Danish tax group subject to mandatory joint taxation. In such cases, the merger date is defined as the date of the company joining or exiting the group relationship.
In case of a cross-border merger with retroactive effect, the merger may affect the Danish corporate taxation of the participating companies before it is adopted by the shareholders. Accordingly, the retroactive effect allows for income earned by a Danish merging company during the period from the merger until the date by which the merger is adopted to be exempt from Danish taxation in case of a cross-border merger out of Denmark.
The purpose of the bill adopted by the Danish parliament is to ensure that in a tax-exempt cross-border merger involving a merging Danish company, the merger date cannot be a date prior to the date on which the merger was adopted by all the participating companies.
Authored by Anders Havelund
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The amendment will also govern tax-exempt cross-border demergers of Danish companies and tax-exempt contributions in kind of a going concern from Danish companies to companies abroad.
The bill is effective as of 23 March 2018 when it was introduced by the Danish minister of taxation.