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Denmark Announces Interpretation of the "AB SKF" ECJ-case
In November 2011, the Danish tax authorities published an announcement concerning the effects of the ruling in the AB SKF-case on the previous and future practices in Denmark. The Danish tax authorities consider the previous Danish practices to have been overruled by the ruling of the European Court of Justice. Danish tax authorities now accept that VAT on costs related to a transfer of shares in some cases can be deducted and will grant such deduction retroactively upon application for qualifying costs incurred in the period from the second half of 2006 and onwards. Taxand Denmark discusses the potential implications of this announcement for Danish multinationals.
In 2009, the ECJ made a ruling in the so-called AB SKF-case (C-29/08) concerning the possibilities of deducting VAT on costs related to the transfer of shares.
According to the Danish practices applicable up until 3 November 2011, a person or business registered for VAT in Denmark could not deduct VAT levied costs related to the transfer of shares (e.g advisory fees), as the transfer of shares is a VAT exempt transaction.
These practices were overruled by the "AB SKF"-ruling and the Danish tax authorities now accept that deductions may be made for costs related to the transfer of shares, including payments to advisors, if the transfer takes place as part of the transfer of a business.
Thus, if a sale of a business or a branch of a business in the form of an asset deal has included a transfer of shares, it should be possible to deduct VAT on payments to advisors having assisted with the transfer. Furthermore, it may be possible to reclaim VAT on payments made in relation to the transfer of shares if the deal has included a transfer of other assets to a degree allowing for the deal to qualify as an asset deal.
The alteration of the Danish practices holds retroactive effect from the second half of the year 2006. Concurrently, it is possible to request for reassessment of the VAT liability from that point in time.
On the basis of the announced change in the Danish VAT practices, a person or business registered for VAT in Denmark and which has sold shares as part of a business transfer or asset deal in the past five years should consider whether to request for a reassessment of their Danish VAT liability.
Requests must be submitted no later than the 3 May 2012 and the business must be able to provide documentation for any repayment claims in the form of accounting records and other supporting information. A best case scenario will lead to repayment of up to 20 percent of the costs incurred on the transfer of shares (including VAT).
Your Taxand contacts for further queries are:
T. +45 72 27 34 77
Poul Erik Lytken
T. +45 72 27 35 31