ReXKern >> UK >> Taxation of SMBA company
“The SMBA company’s tax liability in Denmark”
Visibility
The SMBA partners who establish a SMBA Company will be visible in the “Erhvervs-
og Selskabsstyrelsen” (Danish Commerce and Companies Agency) database, but the new
SMBA partners who enter as the new owners will not be shown in the public record.
This means that the actual ownership will not be able to be found out by outsiders
as the list of the SMBA partners is maintained by the company.
Companies act covering “other companies”
Pursuant to SEL (Companies Act) Section1,6 companies and associations etc. are regarded
as domiciled in this country if the management has its registered office in this
country. A company or an association is liable for tax according to the provisions
in the SEL Act, Subsection 2 -6 of Section 1,1 depending on the articles of association,
its factual activities etc. determined by established criteria. As opposed to A/S
and ApS (section 1,1) it is of no relevance if the registration is in Denmark.
This is based on the ensuring that the SMBA company is covered by the provision
of Subsection 2 of Section 1,1 of the SEL Act concerning other companies in which
none of the partners are personally liable for the company’s liabilities and which
apportions the profit according to the capital paid in to the company by the partners.
Summary
As stated above, there will not be an independent tax liability for a SMBA which
is not domiciled in Denmark.
The tax liability to Denmark occurs when the SMBA either operates business activities
in/from Denmark or is managed from Denmark, and it will then be liable for corporate
taxes in Denmark
The concept of the domicile of the company in Denmark is based on a concrete assessment
of the factual circumstances in connection with the day-to-day decisions.
It will primarily be based on the registered office of the (board of) management.
However, no complete list of management functions or –decisions that are to be situated
in this country can be made in order to conform to the requirement. In some cases
that may be used as guidance importance was attached to staff, purchases, product
mix, financing, marketing etc.
Tax liability to Denmark
If the management have a connection to Denmark for the purposes of taxation depends
on an individual determination, which is why the management and their respective
advisors should evaluate a potential tax obligation to Denmark by considering if
there is a tax liability to Denmark.
Fixed place of operations
The SMBA will be considered to have a fixed place of operations (“fast driftssted”)
in Denmark if the company conducts a significant share of its activities in Denmark,
i.e. that the source of the SMBA’s income originates from Denmark.
A fixed place of operations has been established in Denmark if the SMBA has:
- offices(s) in Denmark
- factory(ies) in Denmark
- a workshop
- AND/ OR carries out its enterprise in Denmark - a business location
Investment in real property in Denmark will always be considered as being a fixed
place of operations in Denmark.
If there is no fixed place of operations in Denmark, tax liability in Denmark will
only arise if the SMBA is managed from Denmark or has a place from which the SMBA
is managed.
Location of the domicile of the management
The SMBA will be considered to be domiciled in Denmark, if it in fact is managed
from Denmark or the essential decisions are made in Denmark.
With the evaluation of the location of the management, decisive weight will not
be placed on where the location of enterprise’s management is formally located.
It is, on the other hand, where the actual management of the business operations
takes place that is determinative of where the management’s domicile is regarded
to be located.
If the essential operational decisions are made by a representative in Denmark,
the domicile of the management will be regarded as being domiciled in Denmark, irrespective
of the fact that the SMBA’s formal management in the form the Board of Directors
and senior management consists of individuals who are not resident in Denmark.
This could be the case for example, if a Danish representative makes decisions on
behalf of the SMBA and the decisions are of an essential character and frequent,
so that the formal management does not exercise primary and essential influence
on the activities of the enterprise.
There will be a individual and actual evaluation of the decision-making process,
where there will be in each case tax liability to Denmark if it is enterprise where
it makes very few but essential decisions in Denmark and the activities are characterized
by relatively few matters, while the same type of decisions made by a Danish representative
in another enterprise will not be regarded as being essential and frequent, so that
the actual management in this situation occurs outside of Denmark, and which is
why it will not be subject to tax liability to Denmark.
Conclusion
If the SMBA has a fixed place of operations or in fact the SMBA is managed from
Denmark, the SMBA will be subject to taxation in Denmark of the income/profits of
the SMBA.
If a SMBA is established with the ownership consisting of foreign partners and is
foreign managed, the income of the SMBA will only be subject to taxation in Denmark
if the SMBA is regarded as being domiciled in Denmark.
If the SMBA does not have a place of operation in Denmark and decisions are not
made in Denmark (the management takes place outside of Denmark), then will the SMBA
will not be liable to Denmark for taxes on income.
Nor will tax liability to Denmark occur solely on the basis of the fact that goods
are bought from or sold to Danish enterprises, if the SMBA’s place of operations
and management is located outside of Denmark.