Danish ruling changes securities lending practices
07 November 2011 Copenhagen
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Following a new ruling, Danish tax authorities have published a notice that transfers of shares with termination agreements, even without maximum lending periods, are securities lending transactions.
Before the decision, explains law firm Kromann Reumert, the lending of securities traded on a regulated market had not been considered a "sale and disposal of shares" transaction for Danish tax purposes, provided that a number of conditions were met, including a maximum lending period of six months.
However, in the recent case, a taxpayer requested a binding tax ruling on a securities lending transaction entered into for short-selling purposes. Under the terms of the transaction, the lender was entitled to terminate the loan with three days' notice while the borrower could do the same by one day's notice. No maximum lending period was fixed under the terms of the transaction.
This ruling impacts any transactions with similar terms backdated to 11 October this year.
Before the decision, explains law firm Kromann Reumert, the lending of securities traded on a regulated market had not been considered a "sale and disposal of shares" transaction for Danish tax purposes, provided that a number of conditions were met, including a maximum lending period of six months.
However, in the recent case, a taxpayer requested a binding tax ruling on a securities lending transaction entered into for short-selling purposes. Under the terms of the transaction, the lender was entitled to terminate the loan with three days' notice while the borrower could do the same by one day's notice. No maximum lending period was fixed under the terms of the transaction.
This ruling impacts any transactions with similar terms backdated to 11 October this year.
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