So far, the lending of securities traded on a regulated market has not been considered a dis-posal for Danish tax purposes, provided that a number of conditions were met, including a maximum lending period of six months.
New decision by the Danish National Tax Board
In a case recently decided by the Danish National Tax Board, a taxpayer requested a binding tax ruling on the Danish tax treatment of a securities lending transaction entered into for short-selling purposes.
No maximum lending period was fixed under the terms of the transaction. Instead, the terms provided that the lender was entitled to terminate the loan by three days' notice and that the borrower was entitled to terminate the loan by one day's notice.
The Danish National Tax Board found that an agreement to lend securities which can be terminated by one or both parties must be considered securities lending (and not a sale and disposal of shares) for tax purposes, even if there is no maximum lending period.
Notice from the Danish tax authorities
Following the new ruling, the Danish tax authorities have published a notice that the ruling constitutes a change of practice regarding the Danish tax treatment of securities lending transactions and that this change of practice applies to securities lending transactions entered into on or after 11 October 2011.
According to the notice, the change of practice only applies to
securities lending transactions with termination provisions similar
to those in the recently decided case.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
