Rules Concerning the Tax Treatment of Equity Compensation to Employees in Startups
Published 25 September 2020
Category: Taxation / VAT
On 21 August 2020, the Danish Ministry of Taxation published for consultation a draft proposal according to which previously adopted amendments to the Danish Tax Assessment Act concerning the tax treatment of equity compensation to employees in “startups” will enter into force on 1 January 2021.
The amendments will expand the application of certain favourable rules on the tax treatment of equity compensation to employees (section 7 P of the Danish Tax Assessment Act) to allow employees in “start-ups” to receive equity compensation of a value corresponding to up to 50% of their annual salary at the time of grant without such compensation being taxed as salary.
Application of the rules will be subject to fulfillment of various conditions, including that (a) at the time of grant, the “start-up” must have had no more than 50 employees in one of the two most recently presented annual financial statements, (b) at the time of grant, the “start-up” must have had a net revenue not exceeding DKK 15 million or a balance sheet total not exceeding DKK 15 million in one of the two most recently presented annual financial statements, and (c) “the start-up” must have been active in a market for less than five years before the calendar year in which the agreement with the employee is concluded.
Next steps: The consultation period ended 18 September 2020 and we expect the draft proposal to be presented in parliament during autumn 2020.
See the draft proposal presented for consultation here (in Danish).
Also tagged ‘Danish Regulation’
The Danish Financial Supervisory Authority publishes guiding statement on alternative investment fund managers’ inclusion of leverage in unlisted companies and issuers
On 17 December 2024, the Danish Financial Supervisory Authority (Danish FSA) published a guiding statement regarding the inclusion of leverage by alternative investment fund managers (AIFMs) in unlisted companies and issuers.
AIFMDDanish RegulationESMAThe Danish FSAThe Danish FSA has updated the fit & proper guidelines
On 29 November 2024, the Danish FSA published a new and updated version of its guidelines on requirements in the financial legislation regarding the suitability and integrity of board members, executive management members and key persons in financial companies, known as the fit & proper guidelines.
Danish RegulationGovernanceThe Danish FSANew green investment scheme consultation
On 21 December 2023, the Danish Financial Supervisory Authority published a draft executive order on a new green investment scheme for consultation.
Danish RegulationSustainabilityRevision of the Investment Screening Act has entered into force
On 1 July 2023, a revision of the Investment Screening Act (the “Act”) entered into force. The revision revolves around two areas: public contracts and administrative procedures.
Danish RegulationGovernanceNew rules on more flexible fit & proper assessments adopted
On 18 April 2023, the Danish Parliament adopted the proposal to amend the financial regulation presented by the Danish Government, which includes amendments to the rules on fit & proper assessments.
Danish RegulationGovernanceNew rules on severance pay to managers of AIFMs adopted
On 18 April 2023, the Danish Parliament has adopted the proposal to amend the Danish financial regulation, including the Danish Alternative Investment Fund Managers Act.
Danish RegulationDisclosure RequirementsManagement RemunerationPublic consultation of the Investment Screening Act has ended
On 8 March 2023, a proposal for changes of the Investment Screening Act (the “Act”) was submitted for public consultation. The Act has been in effect since 1 September 2021, and based on the experiences with the Act this far, as well as the situation in and around Denmark, amendments to the Act have been deemed necessary.
Danish RegulationGovernanceNew rules on severance pay to members of the management of AIFMs
On 8 February 2023, the Danish Government presented a proposal for amendments in the Danish financial regulation, including the Danish Alternative Investment Fund Managers Act.
Danish RegulationDisclosure RequirementsManagement RemunerationRequirements for Gender Composition in Managements have Tightened
On 1 January 2023 new rules have imposed stricter requirements for targets and policies on the gender composition of managements. These rules cover both large Danish companies (covered by accounting class C), including state-owned and some listed companies (covered by accounting class D), as well as certain companies within the financial area
ComplianceDanish RegulationSustainabilityEU Legislation Takes Action Against Greenwashing
Lately, EU has sharpened its focus on preventing greenwashing as well as strengthening the sustainability reporting requirements. One step, among others, is the recent passing of the CSRD. Another is a proposal published in March 2022 by the European Commission with amendments for the Directive 2005/29/EC on Unfair Commercial Practices (UCPD) as well as the Directive 2011/83/EU on Consumer Rights.
Cross-BorderDanish RegulationSustainabilityAmendments to the Danish Corporation Tax Act and the Danish Tax Assessment Act have entered into force
Following the amendments, enacted on 9 June 2022, the corporate tax rate applicable to financial companies has increased from 22 percent to 25.2 percent as per 1 January 2023 and will increase to 26 percent in 2024.
Danish RegulationManagement RemunerationHigher Corporate Tax Rate for Danish Financial Companies and Deductibility Cap on Salary Expenses
On 6 April 2022, the Danish Government presented a proposal for an amendment of, among others, the Danish Corporation Tax Act.
Danish RegulationManagement RemunerationCommission Delays Application Date for the ESG Disclosure and Taxonomy Regulations
The Commission has postponed the date of application of the detailed regulatory technical standards (RTS) under the ESG Disclosure Regulation and the Taxonomy Regulation by six months from 1 January 2022 to 1 July 2022.
ComplianceCross-BorderDanish RegulationCommission Clarifies Questions of Interpretation Regarding ESG Disclosures
The Commission has answered a number of questions from the European Supervisory Authorities (ESAs) regarding the ESG Disclosure Regulation.
ComplianceCross-BorderDanish RegulationReclassification of Tax Transparent Entities
On 19 and 20 April 2021, the Danish tax authorities published two rulings from the Tax Assessment Council (in Danish: Skatterådet) regarding reclassification of tax transparent entities
Danish RegulationNew Danish Act on Screening of Foreign Direct Investments
The new act on control of foreign direct investments (the “Act”) was adopted on 4th May 2021. The Act introduces a new framework for government screening of foreign investments and certain types of agreements with Danish companies.
ComplianceCross-BorderDanish RegulationEntry into Force: Guidance Signal Excluding Certain Alternative Investment Funds from VAT Exemption on Management Fees
On 7 May 2020, a guidance signal which excludes certain alternative investment funds from VAT exemption on management fees entered into force.
Danish RegulationManagement RemunerationGuidance Signal Excluding Certain Alternative Investment Funds from VAT Exemption on Management Fees is Adopted by the Danish Tax Agency
On 7 November 2019 the Danish Tax Agency presented its guidance signal concerning the rules on VAT exemption for management fees for management of investment undertakings.
Danish RegulationManagement RemunerationProposal to Increase Certain Requirements for Managers under the AIFM and AML Act Published for Consultation
On 28 August 2019 the Danish FSA (in Danish: Finanstilsynet) published for consultation a draft proposal to change, among others, the Danish AIFM Act and the Danish AML Act.
ComplianceDanish RegulationKYC / AMLWhistleblowingJapan Deemed a Sector Specific, Safe Third Country by the Danish DPA
Transfer of personal data from Denmark to (private) organisations in Japan that are subject to the APPI will not require prior approval from the DPA.
ComplianceDanish RegulationGDPRDanish Company Faces Prosecution and a Fine of DKK 1.5 mill. for GDPR Violation
On 11 June 2019, the Danish Data Protection Agency ("DPA") has reported a Danish furniture company to the Danish police for not deleting information on approx. 385,000 customers.
ComplianceDanish RegulationGDPRDanish Parliament Strengthens Registration Requirements of Ultimate Beneficial Owners
On 2 May 2019, the Danish Parliament adopted amendments to the Danish Companies Act, which implements part of the 5th EU Anti-Money Laundering Directive.
Beneficial OwnershipComplianceDanish RegulationDisclosure RequirementsKYC / AMLFine of DKK 1.2. mio. Recommeded for Taxi Company’s Storage of Costumer Phone Numbers
On 25 March 2019, the Danish Data Protection Agency submitted a notice to the Danish police regarding a Danish taxi company’s violation of GDPR for storage of customer phone numbers.
ComplianceDanish RegulationGDPRProposal to Strengthen the Registration of Ultimate Beneficial Owners
On 13 March 2019, the Danish Government presented a proposal for an amendment of various acts including the Danish Companies Act which implements part of the 5th EU Anti-Money Laundering Directive concerning the registration of ultimate beneficial owners.
Beneficial OwnershipComplianceDanish RegulationDisclosure RequirementsKYC / AMLGuidance Signal Excludes Certain Alternative Investment Funds From VAT Exemption on Management Fees
On 8 March 2019, the Danish Tax Agency published a draft guidance signal for public hearing. If implemented, the guidance signal will exclude certain alternative investment funds from VAT exemption on management fees.
Danish RegulationManagement RemunerationNew Proposal to Implement Authority to Enforce the PRIIPS-Regulation Into Danish Law
On 27 February 2019, the Danish Government presented a proposal for an amendment of the Danish AIFM Act giving the Danish Financial Supervisory Authority competence to enforce the PRIIPs regulation.
ComplianceDanish RegulationDisclosure RequirementsKID / PRIIPSWhistleblowingEU Court of Justice Issues Ruling in Danish Beneficial Ownership Cases
The CJEU judgments will likely have a big impact on international group structures and will also contribute to the interpretation of the anti-abuse principles of EU law and the "beneficial owner" concept.
Beneficial OwnershipDanish RegulationOther updates
Repeal of rules regarding shareholder loans and other amendments to the Danish Companies Act
On 19 December 2024, the Danish Parliament has adopted the amendment acts L71 and L72 regarding amendments to the Danish Companies Act and other Danish laws.
Venture CapitalAbolition of the ‘entrepreneur tax’ and other changes to Danish tax legislation adopted
On 19 December 2024, amendments to the Danish Corporation Tax Act, the Danish Capital Gains Tax Act and the Danish Personal Tax Act, as well as other Danish tax laws, were adopted by the Danish Parliament.
Venture CapitalThe Danish Financial Supervisory Authority publishes guiding statement on alternative investment fund managers’ inclusion of leverage in unlisted companies and issuers
On 17 December 2024, the Danish Financial Supervisory Authority (Danish FSA) published a guiding statement regarding the inclusion of leverage by alternative investment fund managers (AIFMs) in unlisted companies and issuers.
AIFMDDanish RegulationESMAThe Danish FSAThe Danish FSA’s role in the sustainability reporting in 2025
The Danish Financial Supervisory Authority (“FSA”) has published a short press release regarding their role in relation to the sustainability reporting in 2025.
CSRDProposal on independent providers of audit services regarding sustainability reporting
The Danish Parliament has presented a proposal for legislation on independent providers of audit services regarding sustainability reporting.
CSRDInvest Europe launches enhanced ESG reporting template
Invest Europe has launched an enhanced ESG reporting template to drive convergence and support early-stage investors developed with Venture ESG.
CSRDSFDR