Can You Sell a Company With a Tax Loss Carried Forward?

If your company has an accumulated tax loss, that doesn't mean it can't be sold. Many Danish ApS and A/S companies with losses change owners every year. But there's a key tax rule you and a potential buyer should know before negotiating price — because it affects what the loss is actually worth after a change of ownership.

The starting point: losses can be carried forward

Generally, a company can carry a tax loss forward and offset it against future earnings, year by year, until it's used up. That's partly why a loss-making company can be attractive to take over — in theory, it reduces future tax payments.

The limitation on change of ownership: Section 12 D of the Danish Corporate Tax Act

If more than 50% of a company's capital or voting rights change owner, a special limitation rule kicks in (Section 12 D of the Corporate Tax Act). Broadly speaking, the rule limits the right to carry the old loss forward going forward — the loss can no longer be offset against earnings from genuinely new activity in the same way as before the change of ownership. The purpose of the rule is to prevent a company from being acquired primarily for its loss, rather than for the business it actually runs.

There are nuances

The rule doesn't apply uniformly in every case. There's a difference between whether the company is an active, ongoing business that continues unchanged after the change of ownership, or whether the underlying activity has effectively ceased before the change of ownership — the two situations are treated differently. Listed companies are also exempt from the limitation. Because the rule's consequences depend heavily on the specific situation, this isn't something you or a buyer should conclude yourselves — it should always be verified by an accountant or tax advisor before the price is finally negotiated.

Why it matters for the price negotiation

Sellers sometimes overestimate the value of an accumulated loss, because they think of it as "money in the bank" for a buyer. In practice, an experienced buyer will often already know about the Section 12 D limitation and therefore assign the loss a lower value than the seller expects — simply because the buyer knows the loss can't necessarily be freely used after the takeover. It's worth clarifying this in advance, so it doesn't become a surprise mid-negotiation.

What should you do as a seller?

• Get your accountant to map out the specific consequences of a change of ownership for your loss, before you set a price.
• Be open about the loss from the start. A serious buyer will investigate it as part of due diligence regardless.
• Expect it to affect the negotiation — not necessarily negatively, but be prepared for a buyer not automatically valuing the loss krone for krone.

Frequently asked questions

Is an accumulated loss automatically cancelled on a change of ownership?

Not automatically cancelled, but the right to carry it forward and offset it is limited if more than 50% of the capital or voting rights change owner, per Section 12 D of the Corporate Tax Act.

Does the limitation apply to all companies?

No, there are nuances — among other things, a continuing active business is treated differently from a company where the activity has effectively ceased, and listed companies are exempt. The consequences should always be assessed specifically by an accountant.

Should I mention the loss before a buyer finds it themselves?

Yes. A serious buyer will discover it during due diligence regardless, and being open about it from the start builds trust in the negotiation rather than suspicion if it seems hidden.

Read more about tax and VAT when selling a business, or about how tax on a transfer or sale is generally handled.