A new Danish tax Act imposes increased fines for non-compliance with the reporting requirements for share-based incentive schemes.

Share-based incentive schemes and reporting requirements

When share-based incentives are issued to employees in Denmark, the employer company is, as a general rule, required to report certain information to the Danish tax authorities.

Increased fines

A new tax Act has recently been adopted by the Danish Parliament. It signals an increased focus on reporting obligations for employer companies.

Under the new Act, the fines payable if the reporting obligations are not complied with depend on the number of employees in the company as follows:

1-4 employees: Fine DKK 5,000

5-19 employees: Fine DKK 10,000

20-49 employees: Fine DKK 20,000

50-99 employees: Fine DKK 40,000

100+ employees: Fine DKK 80,000

Gross negligence required

As previously, a fine will only be payable if the employer company has deliberately or with gross negligence failed to comply with the reporting obligations.

However, it follows from the legislative history behind the new Act that in the opinion of the Danish Minister of Taxation an employer company must, as a general rule, be deemed to have acted with gross negligence when the relevant reporting obligations are not complied with.

According to the Minister, a fine is therefore, as a general rule, payable if reporting is not made as required.

Effective date

The new rules became effective as of 1 July 2012. The increased fines are a good opportunity to consider whether, for example, international share schemes fall within Danish reporting obligations and, if so, when reporting is required.