Amended rule regarding taxation of debentures

Date 9 feb. 2010

Amended rule regarding taxation of debentures

Effective 27 January 2010, the rules regarding taxation on the sale of debentures owned by private investors have been amended. The amendment is done in order to bring Danish law in compliance with EU-law. Consequently, the previous distinction between debentures in Danish kroner and debentures in foreign currency has been repealed.

 

Pursuant to the amended rules, gain or loss on debentures are taxable, without regard to whether the debentures meet the minimum interest requirement, provided that the debentures are acquired on or after January 27, 2010.  The previous rule, pursuant to which private investors were not taxable on gain or loss on debentures that met the minimum interest requirement, so-called blue-stamped debentures, continue to be applicable to those debentures that were acquired before January 27, 2010.

 

Under the former rule, private investors were generally not taxable on gain or loss on debentures, provided that the interest on the debenture equalled or was greater than the minimum interest. See Capital Gains Act (“CGA) Section 14(1) and (2). The minimum interest is determined pursuant to the CGA Section 38. When determining whether a debenture meets the minimum interest requirement, the stated interest must be compared to the maximum amount the creditor can demand upon redemption. If it is not possible to calculate the interest upon the issuance of the debenture, the minimum interest requirement is not met. 

 

If the debenture meets the minimum interest requirement, it is characterized as a blue-stamped debenture. If it does not meet the minimum interest requirement, it is instead characterized as a black-stamped debenture. Gains on black-stamped debentures are taxable, but losses are not deductible.

 

Effective January 27, 2010, the rule is amended, such that it is no longer necessary to distinguish between blue-stamped and black-stamped debentures. However, since the rule is effective from today only, the distinction is still relevant for those debentures that were acquired prior to January 27, 2010. However, private investors can still avoid taxation on debentures acquired on or after January 27, 2010, in that the new rule includes a threshold limit, pursuant to which, net gains or net losses are taxable only if they exceed DKK 2,000.

 

If you have questions regarding the above or require additional information about the amended rules, please contact attorney Dan Moalem (dmo@mwblaw.dk), or senior associate Henning Hedegaard Thomsen (hht@mwblaw.dk).


The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions of considerations.