Understand Deductions

What is deduction for loss on business

deduction loss business

What is the deduction for losses on business?

The deduction for losses on companies is relevant for those who have started or owned shares in a company (that is not listed on a stock exchange). And there can be a lot of money to be made here. For example, a citizen had the opportunity to receive 1,750,000 DKK in deductions for his losses.

Deductions cover any losses you may experience if you e.g. as many other people have started an IVS or ApS company, which you subsequently have had to close. Then there may be deductions for this. How it works, we'll guide you through this article.

In this article, we will cover:
  • What deductions for loss on business are
  • Other conditions you will need to be aware of
  • Whether you are eligible to receive any deductions

What is the deduction for losses on business?

There are basically two different scenarios for when you can get the deduction. The first is if you have started a business yourself or with others and then have had to shut it down again later. For example, in the last few years there has been a wave of entrepreneurs starting their own business, partly due to the low cost of starting an IVS. But now that IVS companies are no longer allowed, you have either had to shut it down or convert to an ApS company. For all those who have shut the company down, there is good news - it entitles you to a deduction.

The second scenario is if you bought shares in a company and later sold your shares at a lower price than the one you bought them for. As a result, you have made a loss on your shares, and you can get a deduction for that. Here, it is important that it doesn't concern listed companies, as losses are typically reported automatically by the stock exchange.

The deduction itself is the money you lose. That is, if you start a company by contributing 40,000 DKK and it then goes bankrupt, then that's roughly your deduction. However, close attention should be paid to the additional conditions concerning the deduction as described below.

What else do you need to be aware of?

There are several key elements to be aware of with this deduction:
  • The loss must be final. For example in the case of bankruptcy, the company must have gone bankrupt and deregistered with the Danish Business Authorities
  • You must be 'fully tax liable' in Denmark. In other words: you must not have paid tax in countries other than Denmark through your ownership of the shares
  • You must take into account additional capital injections that you may have made in the company
  • The shares must not have been traded on a regulated market during your time of ownership, e.g. on a stock exchange
  • You must have documentation of the loss, i.e. on your purchase/sale and closure of the business

Check to see if you are eligible for any deductions

Deduction for losses on business is a hidden bonus that can quickly turn into a lot of money.

That's why we in Tax Helper have created an easy and intuitive platform where you can easily see if you can get the deduction and get all the way across the finish line of reporting your deduction to SKAT. It is free to try out, and you only pay if you get a tax refund.