Author Topic: NORTHM - Northmedia  (Read 5766 times)

John Hjorth

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Re: NORTHM.CPH - North Media A/S
« Reply #20 on: June 29, 2020, 05:15:07 AM »
Thank you for chiming in here, Hielko,

I'll recheck the tax stuff again and get back here, but later today. I'm right now busy with other stuff, that has to be done within normal office hours.
« Last Edit: June 29, 2020, 11:25:09 AM by John Hjorth »
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Hielko

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Re: NORTHM - Northmedia
« Reply #21 on: June 29, 2020, 05:33:07 AM »
Hi John,

Appreciate your insights in the Danish tax stuff.

Do you also know how the taxation works here for the majority shareholder? What kind of taxes does he pay if North Media pays a dividend and he lets it flow all the way to his personal bank account? Goes tax free to Baunegard ApS I guess, and then?

DW1234

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Re: NORTHM - Northmedia
« Reply #22 on: June 29, 2020, 06:52:12 AM »
I think some of these questions are answered in this doc:
https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-denmarkhighlights-2019.pdf

Dividends to Baunegard are probably considered as dividends from 'subsidiary shares' and therefore tax free. It does look like there've been some recent changes in tax laws with regard to dividends, so maybe this is outdated?

In the same doc it says that:
'Losses from previous years are fully deductible against taxable income that does not exceed a base amount of DKK 8.385 million (to be adjusted annually), with any remaining losses available to reduce the remaining income by only 60%. For jointly taxed comanies, the restriction on the use of losses takes place at the level of joint taxation. The carryback of losses is not permitted.'

Does this in essence mean that they pay 100% on their stock gains, and can deduct 60% of their losses (since this base amount is negligible..)? 



kab60

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Re: NORTHM - Northmedia
« Reply #23 on: June 29, 2020, 10:37:40 AM »
Dividends to Baunegaard should be tax free, but from Baunegaard to his personal account he'd be taxed 42 pct I believe. I'm not sure what his playbook is here, but there might be some inheritance tax planning if he has kids. Taxes on OpCos in Denmark is lower that receiving a tax cheque from daddys estate when he dies.

John Hjorth

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Re: NORTHM.CPH - North Media A/S
« Reply #24 on: June 29, 2020, 10:18:56 PM »
Hielko,

What kab posted is correct :

Dividends to Baunegaard should be tax free, but from Baunegaard to his personal account he'd be taxed 42 pct I believe. ...

From the very nice survey document on Danish taxation linked to by DW1234 and provided by Deloitte, p. 3, right column :

Quote
... Capital gains on shares and dividends are taxed progressively as share income at 27% up to DKK 54,000 (for married couples up to DKK 108,000), and 42% thererafter. ...

So, omitting that tiny progression detail in the rule, and based on the financials for Baunegaard ApS uploaded in this topic earlier, Mr. Bunck has incurred the following taxes on dividends from Baunegaard ApS for the years 2018 & 2019, assuming no other share income :

2018 : 42% of DKK 11.428 M ~ DKK 4.800 M, &
2019 : 42% of DKK 17.142 M ~ DKK 7.200 M.
« Last Edit: June 29, 2020, 10:38:08 PM by John Hjorth »
”In the race of excellence … there is no finish line.”
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Hielko

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Re: NORTHM - Northmedia
« Reply #25 on: June 30, 2020, 03:25:42 AM »
Assuming that's correct, holding a stock portfolio inside a corporate entity is a bit of a bone-headed decision in Denmark right, even as a majority shareholder?

If you hold the stocks directly you pay 42% capital gains, but only when you realize them.

If you hold them indirectly you pay 24.5% corporate taxes on your gains (and on unrealized gains!) and then when you pay out the gains as a dividend you pay another 42% dividend tax.

In way that should be good news, because that would imply that there is a big incentive for management to change this. At the same time, you have to question a management team that sets up something like this in the first place...


writser

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Re: NORTHM - Northmedia
« Reply #26 on: June 30, 2020, 05:04:51 AM »
Assuming that's correct, holding a stock portfolio inside a corporate entity is a bit of a bone-headed decision in Denmark right, even as a majority shareholder?

Which makes me think it is not correct. I'm sure Bunck hired somebody to think about taxes / estate planning given that he owns a private holding worth 9 digits and rants in shareholder letters about the government competing with his private company. Maybe the holding is owned by an off-shore holding or something like that?

Though it could be correct, of course.
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Cigarbutt

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Re: NORTHM - Northmedia
« Reply #27 on: June 30, 2020, 05:21:43 AM »
...
If you hold them indirectly you pay 24.5% corporate taxes on your gains (and on unrealized gains!) and then when you pay out the gains as a dividend you pay another 42% dividend tax.
...
If taxation is an issue and the corporate portfolio seen as a potential catalyst, it would be surprising that the ultimate owner is not compensated somehow from double taxation.
Many countries set up complex rules for holding and intermediate companies that somehow allow to compensate for this.

The private holding company has an account (as a reduction to equity in comprehensive income in Canada) which corresponds to investment income tax paid at the corporate level and which is reversed (35-40% rate) at the corporate level when a dividend is paid to the ultimate private personal entity (which can be a trust).

One would need to look into the corporate integration principle in Denmark and into the actual setup established by the owner.

DW1234

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Re: NORTHM - Northmedia
« Reply #28 on: June 30, 2020, 07:02:28 AM »
https://www.kfst.dk/pressemeddelelser/kfst/2020/20200630-fk-distribution-har-misbrugt-sin-dominerende-stilling/

So they've abused their dominant position. Does anybody know what the ramifications of this could be?

John Hjorth

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Re: NORTHM.CPH - North Media A/S
« Reply #29 on: June 30, 2020, 08:38:28 AM »
Thank you for sharing, DW1234,

The Danish Competition Act. [As far as I can see, unfortunately not available in English.]

Please try to read especially paragraph 23 b [about so called "administrative fines"]. The Danish Competition and Consumer Authority is going for more than just an administrative fine. The final ruling will likely be from the Danish court system, with the State Prosecutor for Serious Economic and International Crime [who likely already has turned down an administrative fine] as plaintiff. This will likely take years.

- - - o 0 o - - -

In short, more hair on the company as an investment. The case is mentioned in the 2019 Annual Report.
« Last Edit: June 30, 2020, 08:43:47 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai