In two new binding answers, the Danish Tax Council has found that transfers from the companies to the main shareholders should be recognised as erroneous transfers and not an illegal shareholder loan, as the transfers were made quickly.
A shareholder loan is treated under tax law as a non-refundable withdrawal. This means that the loan is instead treated as a transfer of value from the company to the shareholder, which in practice means that the loan is taxed as salary or dividend. Under company law, there is still a repayment obligation, but repayment of the loan does not generally cancel the taxation. Therefore, in the event of a subsequent dividend distribution from the company to the shareholder, the same amount will have been taxed three times.
In special cases, the tax authorities allow a repayment to cancel the taxation. This is the case either if the money was transferred by mistake or if the shareholder is authorised to make a reversal.
In two new binding answers, the Danish Tax Council decided whether money transfers to the shareholder’s private account could be recognised as an erroneous transfer.
In SKM2022.151.SR, the sales price for the company’s sale of shares was transferred by mistake from the buyer to the shareholder’s private account. The error was discovered by the shareholder on the same day in the evening, after which the shareholder immediately initiated the transfer of the amount to the company’s account, which then went into the company’s account the following day. The reason why the shareholder accidentally disclosed the bank account information on his private account was that the shareholder’s online bank showed an account with the company’s name, which was originally a loan account set up to establish the company.
In SKM2022.174.SR, a company mistakenly made a money transfer to the shareholder’s private investment account. The transfer was discovered immediately afterwards by the investment advisor, and the transferred amount was transferred immediately the next day to the questioner’s investment custody account. The transfer of the funds was made on the instructions of an investment adviser, and at the time of the transfer, the shareholder had no reason to doubt that it was a correct transfer to the company’s custody account that was initiated.
In both cases, the Tax Council found that the transfers to the shareholder’s private accounts had to be regarded as pure errors, which, in view of the rapid onward transfer to the companies’ accounts, had to be regarded as cancelled for tax purposes and therefore not covered by section 16 E of the Assessment Act.
The question as to whether transfers to the capital owner should be recognised as an erroneous transfer still depends on a specific assessment. However, the decisions show the importance of handling the erroneous transfers immediately.
Bachmann/Partners advises in tax cases and has extensive experience in handling illegal shareholder loans. If you are in a similar situation, you are welcome to contact us.
For further information, please contact Christian Bachmann on tel. +45 30 30 45 21 / firstname.lastname@example.org, Ann Rask Vang on tel. +45 20 94 78 21 / email@example.com or Peter Hansen on tel. +45 40 32 35 35 35 / firstname.lastname@example.org.
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