The Danish Supreme Court's judgment of 27 May 2016 disregards the Danish tax authorities' (SKAT) interpretation of the maritime transport concept as laid down in s. 10 of the Danish Taxation of Seafarers Act (sømandsbeskatningsloven).

The case

In May and June of 2009, the shipping company Peter Madsen Rederi A/S assisted GEO, a firm of consulting engineers, with the latter's investigations of the seabed soil initiated in view of the projected offshore wind farm at Anholt. The investigations were carried out by GEO's own staff, who used their own equipment. The task performed by the shipping company for GEO consisted in transporting GEO's staff and their equipment to specific destinations at sea and placing GEO's equipment, which the staff had carried along, on the seabed using the vessel's crane operated by the vessel's crew. The shipping company used the vessel M/S Merete Chris to perform these activities. M/S Merete Chris is a specially constructed vessel with a gross tonnage exceeding 20 tonnes and suitable for dredging and other activities.

The issue of the case was to establish whether the activities performed were to be regarded, in full or in part, as "maritime transport" as specified in s. 10 of the Danish Taxation of Seafarer's Act, and if so, whether they would make the shipping company eligible for reimbursement under this provision. SKAT and the Danish National Tax Tribunal had both found that the activities performed for GEO were not to be regarded as maritime transport since they were performed onboard the vessel, and the various activities constituting the overall task had to be assessed as a whole. The High Court of Western Denmark upheld the decision of the National Tax Tribunal.

The judgment of the Danish Supreme Court

The Danish Supreme Court found that the concept of maritime transport as described in s. 10 of the Danish Taxation of Seafarer's Act is to be understood in accordance with the general EU legal concept of maritime transport, which includes carriage of goods and passengers by sea. The activities performed, which consisted in sailing between the port and the individual destinations at sea where the investigations were to take place, were to be regarded as carriage of passengers and goods and as such be regarded as maritime transport as stipulated in s. 10(2) of the Danish Taxation of Seafarers Act. The activities taking place at the destinations at which the investigations were carried out, however, were, on the other hand, not to be regarded as an integral part of the maritime transport and would not make the shipping company eligible for reimbursement.

Comments by Bech-Bruun

The Supreme Court judgment implies a disregard of SKAT's existing practice in this area, which – in relation to s. 10 of the Danish Taxation of Seafarers Act – does not accept a division of a specific task into maritime transport and other activities. We may expect the judgment to have an impact on a substantial number of cases dealing with similar issues and pending in the administrative appeal system, and , likewise, the judgment may give rise to the reopening of previously submitted applications for reimbursement. Shipping companies whose applications for tax reimbursement have either been rejected in full or resulted in only reduced reimbursement under SKAT's existing practice should reconsider whether there is a basis for applying for a reopening of such previous decisions.