According to Falk and Reng some of the most significant changes to the taxation of capital gains concern the abolition of the 3-year rule and the DKK 100,000 threshold. The abolition of the 3-year rule implies that gains and losses will be treated as equity income regardless of how long the shares have been held. In 2006, the total equity income will be taxed at a rate of 28 percent of the portion amounting to DKK 44,300 or less and at a rate of 43 percent of any amount above. The abolition of the DKK 100,000 threshold means that capital gains derived from the disposal of listed shares are subject to tax as of 2006, irrespective of the size of the portfolio.
The transitional rules introduced with the new Act are described in detail in the article.
The new rules extend the possibilities to deduct losses on shares. Losses on listed shares may for instance be set off against gains and dividends from listed shares. Moreover, losses may be carried forward without a time limit if the loss exceeds the year’s gains and dividends. Losses on the sale of unlisted shares are treated differently than losses from the sale of listed shares.
The new Danish Capital Gains Tax Act does not imply changes to the taxation of pension funds; realised and unrealised gains and losses as well as dividends are still taxable at a rate of 15 percent.
Read the article ‘New Danish Capital Gains Tax Act’ in Focus no. 106 on the website of the Copenhagen Stock Exchange: www.omxgroup.com. Questions to the authors may be sent to the email address: copenhagen@omxgroup.com until January 12, 2005.
