The 3:12 Committee’s proposal – what is happening next?

On 14 November, the 3:12 Committee’s report was sent for consultation. This implies that the proposed regulations have come one step closer to reality. In the following comments we describe the consultation process and what can happen after that process.

As we have previously reported, the 3:12 Committee presented its proposal for changed tax rules for closely held companies on 3 November 2016. The most recent development in the area, in addition to the discussions we have seen in the media, is that the Government on the 14 November 2016 sent its report for consultation to the consultation parties involved. These parties now have approximately three months to present their consultation replies to the Ministry of Finance, with the final reply date being 10 February 2017.

What is meant by the consultative process?

When a proposal is sent for consultation the Government (the Ministry of Finance in this case) requests that selected consultative bodies provide statements regarding the proposal. Usually these consultative bodies are authorities, organisations and municipalities, but the possibility of providing a statement regarding a proposal is offered to everyone. In other words, there is no requirement of an invitation from the Ministry of Finance in order to present a consultation reply. The aim of this consultation process is that the Government wants to ensure that the parties concerned have the possibility to provide a statement as to their view of the consequences arising from the proposal if it is implemented.

What usually happens after this?

The presented consultation replies will, then, be processed by the Ministry of Finance who is to take a position as regards the Committee’s proposal. If it is shown that a large number of the consultative bodies are negative towards the proposal, the Ministry of Finance can choose to refrain from continuing with all or parts of the proposal, which would imply that the proposed regulations would not be implemented as presented by the Committee.

If the Ministry of Finance chooses to proceed with all or parts of the Committee’s proposal, a draft of a law text is presented which is, then, sent for consultation to the Council on Legislation. The Council on Legislation examines the proposal to ensure that it is not in conflict with the regulations in place.

After this, the Ministry of Finance prepares a proposal to be presented to Parliament. In Parliament, the proposal is processed by members of the Tax Committee. The Committee subsequently presents a Committee Report to Parliament in which it is stated whether the majority of the Committee believes that the proposed law should be approved by Parliament. After this, Parliament debates the proposal and votes on it. If a majority in Parliament votes in favour of the proposal, a new law is issued which, according to the Committee’s current proposal, would come into effect on 1Janaury 2018.

Alternatively, the proposal can comprise a part of the budget bill which will be presented in September 2017 and, in such a case, will be prepared and handled as all other budget issues.

In other words, we can note that there are a few stages remaining until the Committee’s proposal can, possibly, be adopted as law, and we also note that, now, as a first stage, we must wait for the statements from the consultative bodies which are to be presented on no later than 10 February 2017.

PwC is holding seminars around the country where we present and analyse the details regarding the proposal.