Contents

This section describes how banks and pension providers must declare and settle PAL tax in connection with the termination of a pension plan mentioned in Section 1(1) of PAL.

The section covers

• Main rule
• Exception
• Special information on the determination of the basis of taxation etc. in connection with the transfer of a plan between banks
• Transfer under Section 41 of PBL from a Danish pension provider to a foreign pension provider in 2008 and 2009
• Declaration and payment deadlines
• Declaration and settlement
• Termination without disbursement
• Notification to the person liable to taxation
• Special information on the closing of pension savings accounts

Main rule (Section 23(1) of PAL)

In connection with the termination of a pension plan mentioned in Section 1(1) of PAL during the year of taxation, the bank or pension provider must do a final calculation of the basis of taxation and the taxable part thereof. This applies both to full and partial termination of pension plans.

 

See also

See also section B.3, Basis of taxation and determining the basis of taxation in respect of plans with life insurance companies and pension funds  (Section 4 of PAL).

 

Exception (Section 23(4), first and second sentences of PAL)

►No termination taxation is to be levied under Section 23(1) of PAL in connection with the transfer of a pension plan under Section 41 of PBL of one of the savings plans mentioned in Section 1(1) of PAL when the transfer takes place◄

►
• within the same bank or pension provider
• between two banks or
• between two pension providers 
◄

►In these instances, the receiving bank or pension provider is subrogated to the obligation of submitting the final statement for the entire year of taxation. This means that the receiving bank or pension provider must do the final calculation of the basis of taxation, withhold and pay the PAL tax for the entire year of taxation. ◄

 

►For details on transfers under Section 41, see section D.1.6 Disclosure of information etc. in connection with transfers under Section 41 of PBL.◄

 

Transfer between pension provider and bank or transfer between two pension providers (Section 23(4), third sentence of PAL)

►The exception does not apply to the transfer of a pension plan under Section 41 of PBL between a pension provider and a bank. This means that a final calculation must be done pursuant to Section 23(1) of PAL irrespective of whether it is a tax-free transfer under Section 41 of PBL. ◄

 

►No termination tax, however, is to be levied under Section 23(1) of PAL in connection with the transfer of an SP account between ATP and a bank.◄

 

►If the pension provider from which the transfer is made has chosen to do a final calculation pursuant to Section 23(1) of PAL, the receiving pension provider must not do a calculation for the entire year of taxation. ◄

 

►In these cases, the receiving pension provider is not subrogated to the obligation of submitting the final statement covering the period from 1 January to the time of taxation under Section 23(1) of PAL. ◄

 

► The receiving pension provider's final statement can thus only cover the period from the time of the taxation under Section 23(1) of PAL and the rest of the year of taxation. ◄

 

►The entry values of the securities in the plan are in these cases the value at the time of termination.◄

 

Special information on the determination of the basis of taxation etc. in connection with the transfer of a plan between banks

If a plan under Section 41 of PBL is transferred between two banks in the period from 16 January in the year of taxation up to and including 19 December in the year of taxation, the receiving bank submits, by 15 January at the latest immediately after the end of the year of taxation, a final statement for the period from 1 January in the year of taxation up to and including 31 December in the year of taxation.

 

If the ceding bank has not submitted a final statement for the period 1-31 December in the previous calendar year, the receiving bank must submit a final statement for this period in the year of taxation in the subsequent calendar year.

 

See Section 2(1) 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.

 

Transfers from Danish banks to foreign banks

If a plan under Section 41 of PBL is transferred from a Danish bank to a foreign bank in the period from 16 January in the year of taxation up to and including 19 November in the year of taxation, the receiving bank submits a final statement by 15 January at the latest immediately after the end of the year of taxation. The statement covers the period from 1 December in the year of taxation up to and including 31 December in the year of taxation in the subsequent calendar year.

 

See Section 2(2) 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.

 

Example

A pension plan is transferred from a Danish bank to a foreign bank on 15 March 2008. The latest year of taxation for the Danish bank is 1 December 2006 - 30 November 2007.

 

The Danish bank does not have to do a final calculation for 1 December 2007 - 15 March 2008.

 

As a general rule, the receiving foreign bank must do a final calculation for the period 1 January 2008 until 31 December 2008. As the Danish bank does not do a final calculation, 1-31 December 2007 must be included in the foreign bank's final calculation for the 2008 year of taxation. This ensures that tax is levied on the month of December prior to the transfer despite the fact that the Danish bank has a non-calendar year of taxation, 1 December 2006 - 30 November 2007.

 

Transfer from a foreign bank to a Danish bank

If a plan under Section 41 of PBL is transferred from a foreign bank to a Danish bank in the period from 16 January in the year of taxation up to and including 19 November in the year of taxation, the receiving bank submits a final statement by 15 December at the latest immediately after the end of the year of taxation. The statement covers the period from 1 January up to and including 31 December in the year of taxation.

 

If the plan is transferred before the foreign bank has submitted the final statement for the first time, the receiving bank submits a final statement by 15 December at the latest immediately after the end of the year of taxation. The statement covers the period from 1 December in the year of taxation up to and including 30 November in the year of taxation in the subsequent calendar year.

 

See Section 3(2) of Order no. 1027 of 24 October 2005 on certain rules in the Danish Pension Investment Return Tax Act, as amended through Order no. 1511 of 13 December 2007.

 

Note

If the person liable to taxation requests that a plan be transferred from a foreign bank to another foreign bank in the period from 20 December up to and including 15 January, the transfer cannot be done until 16 January at the earliest.

 

If the person liable to taxation requests that a plan be transferred from a Danish bank to a foreign bank in the period from 20 November up to and including 15 January, the transfer cannot be done until 16 January at the earliest. See Section 2(2) 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.

 

Transfer under Section 41 of PBL from a Danish pension provider to a foreign pension provider in 2008 and 2009 (Section 37 of PAL)

If a person liable to taxation transfers a Danish pension plan to a foreign pension provider under Section 41 of PBL, the receiving pension provider submits a statement of the basis of taxation etc., cf. Section 21 of PAL. The statement must contain the basis of taxation for the period from the transfer in the year of taxation up to and including 31 December in the year of taxation.

 

This is a transitional rule and only applies to

• pension plans with a bank mentioned in Section 1(1) of the Danish Pension Investment Return Act and
• the 2008 and 2009 years of taxation.

The rule prevents double taxation in the 2008 and 2009 years of taxation as a result of the transition from taxation of the provider to taxation of the individual. This means that taxation only takes place at individual level from the time of the transfer.

 

See also

Disclosure of information in connection with transfer under Section 41 of PBL, see Sections 3-5 in 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. See also section D.1.6. Disclosure of information etc. in connection with transfers under Section 41 of PBL.

 

Declaration and payment deadlines (Section 23(1) and (2) of PAL)

The bank or pension provider must withhold, declare and pay the tax to SKAT within 3 working days of the bank or pension provider having disbursed the taxable benefit. See Section 23(1) of PAL.

 

Example

On 1 February, an account holder liable to taxation informs her bank that she wants to terminate her pension plan with the bank. The amount is disbursed on 15 February, and the bank does a final calculation of the basis of taxation of the account, the taxable part thereof and the PAL tax. Subsequently, the bank has 3 working days (bank days) to pay the PAL tax to SKAT. This means that the payment must be effected by 18 February in the same year at the latest. The pension holder must be notified at the same time as the payment is made.

 

Declaration and payment after the end of the year of taxation

After the end of the year of taxation, banks and pension providers must declare and pay the remaining PAL tax payable plus calculated interest under Section 23(3) of PAL. Banks and pension providers must furthermore submit a statement of the basis of taxation and the taxable part thereof as well as the tax for each of the pension plans mentioned in Section 1(1) of PAL. See Section 23(2) of PAL.

 

Banks, credit institutions and capital pension funds have a deadline until 15 January after the end of the year of taxation. Other pension providers have a deadline until 31 March after the end of the year of taxation.

 

The statement can be made collectively for

• pension savings accounts under Sections 12 or 13 of PBL,
• accounts under Section 42 of PBL,
• instalment savings accounts under Sections 11 A, 15 A and 15 B, cf. Section 11 A, of PBL, and
• SP accounts, cf. the Danish Labour Market Supplementary Pension Fund (ATP) Act.

Banks and pension providers receive a refund of any overpaid tax plus calculated interest under Section 23(3) of PAL. See section D.1.3.2, Interest in connection with overdue payment, for further information.

 

The declaration must be made on a form prepared by SKAT.

 

See also

If the deadline falls on a Saturday, Sunday or public holiday, the deadline is extended. See section D.1.7, Special information on the deadline for submitting statement and paying PAL tax.

 

Declaration and settlement

The basis of taxation, the taxable amount thereof and the PAL tax must be declared in Danish kroner (DKK), and the PAL tax must also be paid in DKK. See the comments on Sections 21 and 22 of PAL in L 10 of 28 November 2007.

 

Foreign banks and pension providers must undertake to translate the foreign currency into DKK at the average current rate of exchange at the time of termination in respect of plans taken out by pension holders with banks and pension providers. See Section 15 C(5) of PBL.

 

Termination without disbursement (Section 23(1), Item 3 of PAL)

On rare occasions, a pension plan is terminated without any disbursement being made in this connection. This is e.g. the case in connection with the pledging of plans.

 

Where the termination does not result in any disbursement, the pension provider must withhold the tax and pay this to SKAT within one month of the bank having been informed of the termination.

 

►This also applies in connection with the transfer of a plan under Section 41 of PBL where termination tax is levied under Section 23(1) of PAL. ◄

 

Notification to the person liable to taxation (Section 23(1), Item 4 of PAL)

Concurrently with the payment of the PAL tax, the bank or pension provider notifies the person liable to taxation of the payment.

 

Such notification must be made in writing. See Section 21 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 amounts.

 

Special information on the closing of pension savings accounts (Section 23(1), Items 5 and 6 of PAL)

When determining the basis of taxation for a pension savings account, the securities are deemed to have been disposed of at the time of the closing of the account at an amount corresponding to the fair value at the time of closing.

 

When determining the basis of taxation, the following is included

• interest due and
• interest accrued but not due.