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Supreme Court of Denmark

Danish tax rule not contrary to international agreement 

Case no. 211/2016

Judgment delivered on 2 June 2017

The Danish Ministry of Taxation

Section 39A(5) of the Danish Capital Gains Tax Act on payment of deferred amount was not contrary to agreement on the free movement of persons concluded between the EU and Switzerland

In 2007, A moved from Denmark to Switzerland, thereby terminating his full tax liability in Denmark. At that time, he owned all shares in a Danish private limited company. At the time of relocation, an unrealised gain on the shares of DKK 0.5bn was calculated. The Danish tax authorities, SKAT, granted A a deferment on the capital gains tax of approx. DKK 240m. In 2009, the company distributed DKK 2.5m to A, and SKAT calculated the balance due on the deferred amount for 2009 at DKK 249,013, cf. Section 39A(5) of the Capital Gains Tax Act.

Before the Supreme Court, A primarily claimed that the balance due for 2009 was DKK 0, as Section 39A(5) of the Capital Gains Tax Act in his opinion was in violation of an agreement on the free movement of persons concluded between the EU and its member states and Switzerland.

The Supreme Court ruled that none of the provisions in the agreement with Switzerland cited by A prevented Denmark from charging exit tax or from demanding payment of outstanding amounts in connection with dividend distribution. Accordingly, the Danish rules on payment of deferred amounts in Section 39A(5) were not contrary to the agreement with Switzerland.

The High Court had reached the same conclusion. 

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