Supreme Court win in leading tax case

Plesner has successfully conducted a test case before the Supreme Court on the tax law principle of substance over form. More than one hundred cases have been waiting for this case.

On 7 December 2006 the Danish Supreme Court decided one of the most important substance over form test cases in recent years.

Partner Hans Severin Hansen had been instructed by Deloitte to intervene in the Supreme Court case in support of the appellant, Finwill ApS, which company had been taxed in connection with sale of its shares in Circuit Electric A/S.

The sale had been implemented by way of a capital injection and a simultaneous capital decrease resulting in a tax free dividend payment to "the seller". However, the tax authorities considered the substance of the transaction to be a taxable sale of shares.

The test case was of immense importance since the model had been widely used in share acquisition scenarios, and more than a hundred cases waited for this case to be decided.

The Supreme Court on 7 December 2006 sustained the claim by Finwill, thus ruling that the transaction could not be set aside on the basis of a substance over form test.

The Supreme Court's summary of the decision is available here (in Danish).

The Supreme Court's ruling is available here (in Danish).

If you have any questions relating to the ruling, please contact Hans Severin Hansen.