• Jonas Kensø
  • Lukas Boie Johansen
4. semester, Erhvervsøkonomi-jura, Kandidat (Kandidatuddannelse)
This thesis examines the effect of illiquidity on the value of unlisted shares in exit taxation situations.

The Danish rules regarding exit taxation are listed in Section 38-40 of the Danish Capital Gains Tax act. This states that gains on shares which are covered by the Danish taxation right, and where the Danish taxation stops for a reason other than the taxpayer’s death, will be considered relinquished at this time. This is especially relevant where a person, who is fully tax liable to Denmark, moves out of Denmark, resulting in the person stopping his full tax liability in Denmark or in situations where the Danish taxation right regarding the shares are ceded according to a double taxation treaty. In this situation the shares will be considered to have been relinquished at the market value.

The thesis finds that there are different methods of calculating the value of shares, and that the most accu-rate models should apply when calculating the value of the unlisted shares. The thesis examines what ef-fect illiquidity of the shares has on the value, and when an illiquidity discount should be applied.

The thesis finds that when a shareholders’ agreement or other similar agreements limit the liquidity of the unlisted shares, an individual assessment of the situation must be made, establishing the amount of dis-count on the valuation. This is based on the single shareholder’s shares.

When the limitations of the liquidity can lead to several different sales prices, all realistic sales prices must be considered. This leads to all non-realistic sales prices to not be considered. The thesis further finds that the limitations of the illiquidity in themselves can lead to a lower market value. This is a result of the fact that the shares are substantially harder to sell.

The thesis also examines the specific size of the illiquidity discounts approved by the Danish Tax Agency as well as by the Danish courts. Because there is not much case law regarding illiquidity discounts in exit taxation situations, the thesis examines case law as well as decisions from Danish tax authorities from other areas within Danish taxation law, where illiquidity discounts have been discussed.

The thesis finds that these decisions and case law generally can be used as an indication on how illiquidity discounts in exit taxation situations are treated but cannot be expected to be directly transferable from one area of the law to another. The analyzed case law and decisions from the Danish Tax Agency all establish an illiquidity discount of between 8-33%. As a result, the thesis concludes this can be considered a realis-tic expectation of the size of the illiquidity discount in an exit taxation situation. However, the size of the illiquidity discount depends on an individual assessment.
Udgivelsesdato16 maj 2023
Antal sider76
ID: 528872136