A tax dispute will usually be initiated because of a disagreement between the taxpayer and the tax authority. The disagreement could, for example, be an amendment of the taxpayer's income report or in case the taxpayer wants to challenge an advance tax ruling from the tax authority.
This section contains the following aspects:
- access to amend a former assessment of taxable income;
- the process of administrative appeal;
- the process of appeal before the courts;
- expert survey and valuation; and
- the taxpayers' possibility of postponement of contested payable taxes.
Taxable individuals and companies have a duty to self-assess their taxable income and submit their tax assessment to the tax authority. A former assessment of taxable income can be amended. However, there is a statute of limitation. As a starting point, a tax assessment can be amended until 1 May in the fourth year following the relevant income year. This applies for both the taxpayer and the tax authority. If the tax authority intends to adjust a taxpayer's assessment, the tax authority is obliged to notify the taxpayer no later than 1 May in the fourth year after the relevant income year. The notification shall be followed up by a final assessment no later than 1 August in the fourth income year following the relevant income year.
In the case of controlled transactions, the notification period is extended to 1 May in the sixth income year following the relevant income year. The extension is a consequence of the complexity of tax assessments in the case of controlled transactions.
If the taxpayer has acted with intent or with gross negligence, the statute of limitation is 10 years. Additionally, other special circumstances can prolong the notification periods.
If the tax authority initiates an amendment of a taxpayer's assessment, the authorities must notify the taxpayer. The notification must contain a general description of the basis for the intended amendment, including new facts or circumstances that trigger the amendment. Once the taxpayer receives the notification, the taxpayer will be granted a certain period of time in order to submit remarks.
If the taxpayer wishes to initiate an amendment of a tax assessment, the taxpayer must notify the tax authority with said request within the same time limit of four years. The request must contain the basis for the intended amendment. The tax authority will draft a decision proposal after reviewing the request. Hereinafter, the taxpayer is granted a certain period of time to submit remarks. Once the tax authority has received the taxpayer's potential remarks, the tax authority will determine the case.
Certain protective mandatory rules apply to taxpayers in order to strengthen the their legal position and for the purpose of legal certainty. One rule provides the possibility to employ a tax reservation in relation to transactions (e.g., a sales agreement or a deed of gift). The tax reservation serves as a guarantee if the transaction has unintended effects. In this case, the transaction may be terminated or may have a different content (e.g., if the tax authority does not accept the anticipated tax consequence of the terms in an agreement the parties can, owing to the tax reservation, amend or annul the agreement with retrospective effect). The tax reservation is only valid if certain conditions are fulfilled. For instance, the tax reservation must be clear, in writing and be notified to the tax authority no later than at the time when the tax authority was informed about the transaction.
Additionally, a taxpayer can request for an advance tax ruling from the National Tax Board in cases where the taxpayer is unsure about the fiscal consequences of an intended transaction. The tax authorities will be bound by their ruling. Consequently, the advance tax ruling can serve as a binding promise from the tax authorities regarding the fiscal consequence of the intended transaction.
In general, the advance tax ruling will be binding for the tax authorities in the following five years. However, if the advance tax ruling concerns a valuation, the ruling will only be binding for a period of six months. Depending on the circumstances, the tax authority can set out a shorter period in which the ruling will be binding.
The taxpayer is required to pay a submission fee of 400 kroner (2019) to obtain an advance tax ruling.
A taxpayer can contest an advance tax ruling by administrative appeal.ii The process of administrative appeal
Once all administrative appeal options have been exhausted, a tax dispute can be brought before the courts. However, a taxpayer may bring a case before the courts if the appeal boards have not issued a decision within six months, calculated from the submission of the appeal. It is a requirement that the appeal board has not issued a preliminary decision.
Anyone with a significant, direct and individual legal interest in a tax decision may submit a complaint to the Tax Appeals Agency.
Some formal requirements must be met, when a case is submitted. For example, an appeal must be submitted no later than three months from the date when the taxpayer received the decision from the tax authority. The complaint must be in written form and the reason for the appeal must be stated. There are no formal requirements for submission of an administrative appeal. However, the appeal must be submitted electronically on the Tax Appeals Agency's website.
Submission of a case triggers a fee of 400 kroner for the taxpayer. The litigation process is rather informal. Both parties will be granted the opportunity to provide additional remarks during the process.
The taxpayer may request a meeting with the responsible caseworker. Generally, it is advantageous to request a meeting. However, it will likely prolong the processing time. During the meeting, the facts and the legal arguments will be discussed with the caseworker in an informal manner.
Once the preparation of the case is finished the Tax Appeals Agency will issue a preliminary decision, which will be sent to the parties for their review.
The taxpayer can request for a meeting with the members of the relevant appeal authority. Following such a meeting, the appeal authority will issue a decision based on the preliminary opinion, the comments provided by the parties and the information and arguments presented at an eventual meeting with the parties.iii The process of appeal at the courts
According to the Danish Constitution, all decisions issued by a public authority can be brought before the courts. The court system is based on a two-instance principle. As a starting point, all cases start in the district court. Hereinafter, the decision can be appealed to the High Court. If a case is of fundamental character, it is possible to apply for a third-instance permission. The demand must be filed to the Ministry of Justice. If the request is granted the taxpayer may bring the case before the Supreme Court.
With permission from the first instance court a case can also be transferred to the High Court. In this situation, the case can be brought before the Supreme Court without special permission.
A case must be brought before the courts within three months calculated from the date the appeal authority issued its decision.
A tax dispute will be processed according to the Danish procedural rules for civil cases, with the necessary adjustments. For instance, only questions that were originally part of the initial decision can be reviewed by the courts. However, the taxpayer can involve new questions if permission is granted by the court. New questions can be processed in the dispute if it can be considered as excusable that the question has not been dealt with previously or it will imply a disproportionate legal loss for the individual if the question is not reviewed as a part of the case.iv Expert survey and valuation
The claimant and the tax authority have a right to request an expert opinion in tax disputes handled by the appeal boards or the courts. Such a request must be filed to the relevant district court.
An expert opinion is admissible when the parties disagree on factual circumstances (e.g., when the parties disagree on the valuation of real estate or shares). An expert opinion cannot be provided to clarify legal disagreements.
The expert opinion must be submitted to the court.
Neither the courts nor the administrative appeal authorities can decide on the procurement of an expert opinion if none of the parties has requested such procurement.
The requesting party must initially bear the expenses; ultimately, the court decides which party has to bear the expenses based on, inter alia, which party the opinion favours. However, the appeal boards can decide that the tax authority shall cover all expenses relating to the procurement of the expert opinion.
The court can decide to appoint more than one expert if requested so by one or all the parties and the case at hand requires more than one expert to be fully examined.
Further, the court can allow additional expert opinions to be provided on the same subject, if this is deemed appropriate or necessary due to a party's relevant objections to the first expert opinion.v Postponement of contested payable taxes
A taxpayer can apply for a postponement of the contested payable taxes. The tax authority usually grants postponement requests. However, the tax authority tends to reject the application if there is a reasonable risk of the taxes not being paid (e.g., if the taxpayer is moving abroad). Furthermore, the tax authority can require collateral for payable taxes as a condition for granting a postponement.
The postponement period of four years can be extended in the event the appeal lasts longer than four years. The postponement will always lapse when the appeal board delivers its decision. The taxpayer must file a new application for postponement if the administrative decision is brought before a court.
Additionally, a complaint can be filed to the Ombudsman or the courts.