Few man's company
According to the general rule, a closely held company is a limited liability company or economic association where four or fewer partners own more than half of the votes in the company.
According to the general rule, a closely held company is a limited liability company or economic association where four or fewer partners own more than half of the votes in the company. A company can also be a closely held company if several operations are run at the same time as there is a person/owner who de facto has the right to decide over the company’s operations and disposes of its results (called the special rule).
A closely held company is a tax law concept that comes from the 3:12 rules that regulate the taxation of owners of closely held companies/closely held companies. 3:12 The rules and with it the closely held company rules are largely about how a dividend from a closely held company or a capital gain from a sale of shares in a closely held company is to be taxed. The purpose of the rules is to regulate how much of a dividend or capital gain is to be taxed as capital income versus earned income. Since the purpose of the rules is to assess whether dividends or capital gains should be taxed as income from work or as capital income, the rules apply only to natural persons.
The regulations distinguish between qualifying shares and unqualified shares in closely held companies. The shareholding is qualified if the partner or a close relative of the partner has been active to a significant extent in the company during the previous five income years (significant extent means that the person’s work input is of great importance for the company’s earnings). For qualifying shares, dividends and capital gains are taxed according to the 3:12 rules, while unqualified shares in the capital income category are taxed at 25% (2013).
To submit a correct k10 form, you need to know, among other things, your share in the closely held company. Ownership in a closely held company is noted in the company’s share register and if there are continuous changes in ownership or capitalisation in the company, it can sometimes be difficult to know its exact share in the company.