Contents

This section describes how interest income must be included in the basis of taxation. Those liable to taxation who determine the basis of taxation according to Sections 3, 6 and 7 of PAL must, as a general principle, determine the taxable asset yields according to the general principles of acquisition of rights under Danish tax legislation. Under Section 15(1) of PAL, special rules do, however, apply to the accrual of interest income.

 

The section covers

  • Plans with banks and credit institutions
  • Pension providers liable to taxation under Section 1(2), Items 1-9 of PAL
  • Treatment of interest on tax amounts under PAL

 

Plans with banks and credit institutions

Holders of pension plans with banks etc. liable to taxation on yields from the pension plan assets who determine the basis of taxation under Section 3 of PAL must include the interest falling due during the year of taxation.

 

This applies to interest on

  • cash accounts, including interest from pooling plans
  • bonds
  • mortgages and
  • and other claims.

 

If the person liable to taxation terminates his or her plan with banks etc., the person liable to taxation must, in addition to the accrued interest, also include the accrued interest not due at the time of termination of the plan.

 

Pooling plans with banks

►Interest income from pooling plans with banks must be included in the basis of taxation, cf. Section 3 of PAL. The requirements are set out in Section 6 of Order no. 1540 of 13 December 2007 on the rules in the Danish Pension Investment Return Tax Act on foreign banks and pension providers and on compensation disbursements.◄

 

►The accrual of interest is based on the yields from the pool. The interest will thus be variable.◄

 

►Under Section 3(3) of PAL, it is, however, only the entire annual net yield which is included, i.e. after deduction of the bank's payment of foreign tax on the relevant securities.◄

 

The yields from the pool must thus be determined according to the principles set out in Section 15 of PAL as follows:

  • Interest on securities must be determined under Section 1(1), Item 1 of PAL as the interest accrued during the year. Full accrual of interest thus applies to pooling plans.
  • Gains and losses are determined according to the inventory principle, cf. Section 15(3), Item 3 of PAL.

The accounting year of the pool is the calendar year.

 

For newly established pools, the accounting period comprises the time from the establishment up to and including the first 31 December.

 

In special cases, SKAT may grant permission to deviate from the rules on accounting period.

 

Bonds

►The rules on the determination of the basis of taxation in connection with the acquisition and disposal of bonds are set out in Section 7 of Order no. 1540 of 13 December 2007 on the rules in the Danish Pension Investment Return Tax Act on foreign banks and pension providers and on compensation disbursements.◄

Sale of bonds with coupon rates

Interest accrued from the last interest-paying period until the settlement date on which the bonds are sold must be included in the basis of taxation for the year of taxation in which the settlement date occurs.

 

Purchase of bonds with coupon rates

Interest accrued from the last date of payment of interest until the settlement date on which the bonds are purchased must be deducted from the basis of taxation for the year of taxation in which where the settlement date occurs.

 

As the bonds purchased are in the portfolio of the person liable to taxation on the subsequent date of payment of interest, the entire interest for the period is included in the person's basis of taxation for the year of taxation in which the interest falls due.

 

Sale of bonds without coupon rates

Refunded interest from the settlement date until the subsequent date of payment of interest is deducted from the basis of taxation for the year of taxation in which the bonds are sold. The subsequent interest must then be fully included in the basis of taxation for the year of taxation in which the interest falls due.

 

Purchase of bonds without coupon rates

The interest refund is included from the settlement date until the subsequent date of payment of interest in the basis of taxation for the year of taxation in which the bonds are purchased.

 

Pension providers liable to taxation under Section 1(2), Items 1-9 of PAL

Pension providers liable to PAL taxation which determine the basis of taxation under Sections 6 and 7 of PAL must include the interest income accrued during the year of taxation. The pension providers which determine the basis of taxation under Sections 6 and 7 of PAL are pension providers which are covered by Section 1(2), Items 1-9 of PAL, i.e. Danish pension funds, the Labour Market Supplementary Pension Fund (ATP), the Employees' Capital Pension Fund (LD) etc.

 

The pension providers must carry out full accrual of interest for the respective year of taxation. This applies both

  • when the year of taxation is the same as the calendar year, i.e. it comprises the period 1 January to 31 December, and
  • when the year of taxation in the event of commencement or cessation of tax liability under Section 1(2), Items 1-9 of PAL comprises a period of less than 365 days.

 

Treatment of interest on tax amounts under PAL

Interest on tax amounts under Sections 23 and 27 of PAL must be included in the basis of taxation in the year of payment.

 

Interest under Section 23 of PAL

Interest under Section 23 of PAL is normally not paid in/paid out until the account holder's tax liability ceases. Under PAL, the interest is thus neither taxable nor deductible for the account holder in the year of payment. Interest must, on the other hand, be included in the capital income in the ordinary income. See Section 4(1), Item 1 of PSL.

 

Only in those instances where an account holder liable to taxation under Section 1(2) of PAL partially closes or transfers or in any other way disposes of his/her pension savings account, can interest under Section 23 of PAL be deducted/included in the basis of taxation in the year of payment.

 

Interest under Section 23 of PAL is calculated when a bank subsequently becomes aware that an error has occurred in connection with the closing, transfer etc. of a pension savings account liable to taxation under Section 1(1) of PAL.

 

See section D.1 Submission of statement and payment.

 

Interest under Section 27 of PAL

Interest under Section 27 of PAL must be calculated when the Danish Central Customs and Tax Administration, the Danish National Tax Tribunal or the courts change the tax liability for a given year of taxation.

 

Interest under Section 27 of PAL is calculated on the basis of the change in the tax liability from 1 January in the year after the year of taxation in question and until payment is made. Interest calculated under Section 27 of PAL may be both interest income and interest expenditure for the person liable to taxation.

 

See section D.2, Controlling and changing the statement.