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From Judicature - the Supreme Administrative Court comments on the term “in connection with business operations” used throughout tax legislation

In judgment No. 2 Afs 112/2008-44 dated 24 February 2009, the Supreme Administrative Court commented on the term “in connection with business operations”. The need for an explanation of the term is the result of a dispute between a taxpayer and the tax authority over a father’s donation of assets to his son, the father and son both having originally been engaged in the same business.

The tax authorities believed the assets were donated in connection with business and thus subject to income tax while the taxpayer disagreed and demanded that the assets be subject to donation tax, which, however, was not applicable since the assets were tax-exempt under the Donation Tax Act. The Supreme Administrative Court ruled that the term “in connection with business” must be interpreted as follows: there must be close relationship between the business operations and the acquisition (receipt) of the donation. The quoted provisions must be interpreted restrictively to distinguish the primary motive of business operations from ones lacking any business-oriented motivation (such as, typically, settling family affairs – as in the case in question). This case was dealt with similarly to the case decided by the Supreme Administrative Court in its judgment No. 2 Afs 23/2008 – 66 dated 28 August 2008.

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