Do You Pay Tax If You Sell Your Company? Transfer or Sale

"Do I have to pay tax when I sell my business — and if so, how much?" This is one of the most common questions we see, including in Danish online forums where sellers of everything from webshops to sole proprietorships look for answers. The short answer is: yes, generally you pay tax on the gain — but how much depends heavily on whether you're selling to an unrelated buyer, or transferring the business to family or a key employee.

Two different paths: sale and transfer

Legally and tax-wise, there are two fundamentally different situations:

• An ordinary sale to an external, independent buyer — where the price is set through negotiation, and the entire gain is generally taxed immediately.
• A transfer with succession to close family or a key employee — where, under certain conditions, it's possible to defer taxation, so the recipient takes over the latent tax instead of you paying it at the transfer.

How an ordinary sale is taxed

How the gain is taxed depends on whether you're selling shares or a personally owned business:

• Selling shares (ApS/A/S): The gain is taxed as share income — 27% up to DKK 79,400 (DKK 158,800 combined for a married couple), and 42% on anything above.
• Selling through a holding company: If you own the operating company via a holding company, the sale itself can often happen tax-free for the holding company. You're only taxed personally once the money is actually paid out to you, for instance as a dividend — the money can't just be freely withdrawn along the way without triggering tax.
• Selling a personally owned business (sole proprietorship/partnership): Here, any gain is generally taxed as personal income, with a significantly higher marginal tax rate than share income. If you've used the business tax scheme, retained profit in the business is also taxed on sale or closure.

If you only sell assets — for example inventory, equipment or goodwill, without selling the company itself — the individual assets are typically taxed separately, and the rules can vary by asset type. If you're unsure how a specific asset sale should be calculated, always have an accountant work it through before you sign anything.

How a transfer with succession works

If you instead transfer the business to your child, a close relative, or — under certain conditions — an employee, the transfer can happen with tax succession. In practice, this means you as the seller aren't taxed on the gain at the transfer itself. Instead, the recipient "takes over" your original acquisition cost, and the deferred tax is only triggered once the recipient themselves sells the business on one day.

If the business is transferred in whole or in part as a gift, gift tax may apply instead of ordinary tax, and the rate is typically lower for transfers within close family than the tax an ordinary sale would trigger. Succession isn't automatic, though — there are a number of conditions, including how large a share of the business is genuine business activity, and these should always be clarified with an advisor well before the transfer takes place.

When does which model make the most sense?

• Selling to an external buyer with no family relation, an ordinary sale with share income or personal income taxation is generally the only option.
• Transferring to family or a key employee, and wanting to keep the business in "safe hands" without the recipient having to raise the full purchase price in cash from day one, succession can benefit both parties.
• If you have a holding structure, an ordinary sale through the company can still give you great flexibility to control when and how much you're personally taxed on — without requiring a family relation to the buyer.

Can the tax be reduced or deferred without succession?

• Holding structure: As described above, a sale through a holding company can significantly defer personal taxation.
• Timing of payout: Spreading the payout from the holding company over several years can, in some cases, avoid the entire amount hitting the high 42% rate at once.
• Earn-out: If you receive part of the purchase price as an earn-out over several years, that can also spread the taxation over time — but it follows its own, more complex rules.

Frequently asked questions

I want to sell my webshop for a couple of million kroner — do I pay tax on the whole amount?

You're taxed on your gain (the sale price minus your acquisition cost and any expenses), not necessarily on the whole sale amount. If you sell shares, the gain is taxed as share income at 27% up to DKK 79,400 and 42% above that.

Can I sell assets out of my sole proprietorship without it being taxed as ordinary income?

No, generally a gain from selling assets in a personally owned business is included in your personal income assessment, and different asset types can have different tax treatment. Always have an accountant do the specific calculation.

Can I freely withdraw money from my holding company after selling the operating company?

No. Money from a tax-free sale through a holding company stays in the company until you choose to pay it out to yourself — typically as a dividend — at which point it's taxed personally.

Is it cheaper, tax-wise, to transfer to my child than to sell to a stranger?

It can be, mainly because a transfer with succession defers your own taxation, and because gift tax on family transfers is often lower than the tax a fully taxable sale would trigger. This does require that the conditions for succession are met.

The tax rules for both sales and transfers are technical, and the right choice depends entirely on your specific situation. Also read our overview of tax and VAT when selling a business, or book a no-obligation call under Advisory & Mediation if you'd like help working through the consequences before you decide.