| ▲ | bryanlarsen 12 hours ago |
| > This creates a perverse scenario where business owners must extract dividends or sell shares every year just to cover their tax bill. With dividend and capital gains taxes at around 38%, you need to withdraw approximately 1.6 million NOK to pay a 1 million NOK wealth tax bill. Why wouldn't you just take a loan against the assets? A few percent of interest is a lot cheaper than 38%. In Canada you used to have to pay taxes on unrealized option gains, standard procedure was to take a loan to pay taxes. If the options gains disappeared, you'd use your next years tax refund to pay back the loan. |
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| ▲ | SiempreViernes 12 hours ago | parent | next [-] |
| If they took a loan then they would have to stay and waste this perfectly good excuse to do what they wanted to do anyway. |
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| ▲ | ivanche 12 hours ago | parent | prev | next [-] |
| And how would they pay back a loan? |
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| ▲ | vidarh 12 hours ago | parent [-] | | If their business grows at a rate higher than interest, there's no reason why the bank wouldn't be happy to add the interest to the loan. If their business is growing at a rate lower than interest, it's a poor investment and they ought to sell it off and put their money somewhere else. Such as lending it out. | | |
| ▲ | ag56 11 hours ago | parent [-] | | > sell if off To who? How? | | |
| ▲ | vidarh 10 hours ago | parent [-] | | If you can't find a buyer, then close it down and sell the assets. The point being that if your business isn't capable of raising capital equivalent to 1% of its taxable value, then this generally isn't a reasonable business. The valuation for tax purposes of unlisted companies is the taxable valuation of the company assets excluding goodwill [1]. In practice this usually means the taxable value of e.g. a startup tends to be quite low. [1] https://www.skatteetaten.no/rettskilder/type/handboker/skatt... |
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| ▲ | cscurmudgeon 12 hours ago | parent | prev [-] |
| > A few percent of interest is a lot cheaper than 38% Not sure why that is comparable. |
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| ▲ | vidarh 10 hours ago | parent [-] | | Let's say you have a tax debt of 1m, and your choice is to take out a 1m net dividend. Now you have to pay dividend tax. The other alternative is to borrow 1m, and pay interest on a 1m loan. Unless you hold the loan long enough for the aggregate interest accrued until you're able to sell some shares exceeds the dividend tax, it's a net saving. | | |
| ▲ | cscurmudgeon 8 hours ago | parent [-] | | Ah, ok. But how many illiquid companies pay out dividends though? The real alternative is to not tax illiquid wealth. | | |
| ▲ | vidarh 2 hours ago | parent [-] | | > Ah, ok. But how many illiquid companies pay out dividends though? Ones whose founders have protected themselves against a significant wealth tax bill by ensuring investment agreements etc. protect their ability to. It's not rocket science to make this work if you worry about it. > The real alternative is to not tax illiquid wealth. Why? Taxing illiquid wealth has worked just fine in Norway for decades. |
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