New legislation on taxation of shareholder loans

Controlling influence is defined as ownership or control of voting rights in a company where a person, directly or indirectly, owns more than 50% of the share capital or controls more than 50% of the voting rights. Any shares held by closely related family members are included in this assessment.

The risk of double taxation arose because a loan from a company to its shareholder was treated as taxable income for the shareholder, either as salary or dividend. If the shareholder subsequently repaid the loan using funds that have already been taxed, this would not entitle the shareholder to withdraw a corresponding amount again without taxation. In such cases, the provisions led to taxation both on the original loan amount (even if repaid) and on any future withdrawals.

The solution was often to avoid repayment and instead distribute or transfer the claim (receivable) to the shareholder as dividend or salary, provided that the legal requirements under company law allowed this. Due to the tax qualification, this was not considered a transfer of a claim for tax purposes and therefore did not trigger taxation. Under civil law, the company’s claim against the shareholder was transferred as a dividend or salary, which caused the receivable to be extinguished through set-off (in Danish: "confusion").

To mitigate the tax consequences of this double taxation, the loan repayment is now reclassified under the new legislation as a loan from the shareholder to the company. For tax purposes, the loan will be interest-free and repayable on demand. This results in the following scenario:

• The shareholder is taxed on the original loan from the company as either salary or dividend, depending on the qualification.
   
• When the shareholder repays the loan to the company, this is treated as a loan from the shareholder to the company, and the repayment is not included in the company's taxable income.
   
• If the shareholder subsequently borrows the same amount again, this will be treated as a repayment of the loan from the company to the shareholder, which does not trigger further taxation.
   

As a result of this adjustment, the shareholder will only be taxed once on the loan amount. If new amounts are borrowed from the company at a later time that exceed previously taxed amounts, only the excess will be subject to taxation.

In practice, the company will establish a “tax accounting balance” for the individual shareholder when the first repayment is made.

This is a long-awaited change to the previous and unreasonable legislation that has resulted in double taxation. Unfortunately, the new rules that are in force from 1 January 2026 do not have retroactive effect and therefore the described double taxation will still affect earlier loans.