The courts are uncompromising, when it comes to forgotten tax deductions

28 April 2017

Anders Kiærskou, Manager, Tax |

The Supreme Court has clearly stated that the taxpayer is responsible for a proper tax assessment. The limitation period is 3 years and 4 months - even if the taxpayer ends up paying taxes on income, the taxpayer has not earned.

In case of forgotten deductions, a reopening of old tax assessments may be requested until 1 May of the fourth year after the end of the income year. Currently, 2013 and later years can be reopened. After 1 May 2017, only 2014 and later years can be reopened.

Reopening of tax assessments subsequent to the general limitation period can be allowed in cases of "special circumstances", but this usually does not imply cases of forgotten deductions. Case law is very rigid as illustrated by a recently published ruling of the Supreme Court.

The case concerned an individual, who had paid back social security in 2004 amounting to just over DKK 300,000. There was no doubt that he was entitled to a deduction for the amount, because he had been taxed on the amount upon receiving it.

The municipality did not report the repayment to the Danish tax authorities as required by law. Consequently, the deduction did not appear on the taxpayer’s tax assessment for 2004.

The general limitation period for reopening the tax assessment for 2004 expired on 1 May 2008. However, the taxpayer did not apply for resumption until 2012. At that time, however, it was too late according to the Supreme Court.

This was due, inter alia, to the fact that the rules on reopening tax assessments subsequent to the general limitation period under exceptional circumstances have a narrow scope, and that the taxpayer in all the years possessed the necessary information to detect the error. Further, the missing deduction could not be attributed to errors committed by the tax authorities. Thus, there were no "special circumstances". The taxpayer's private circumstances could not be considered important.

The verdict is a very clear indication that taxpayers are fully responsible for a proper tax assessment. This is the case regardless of the taxpayer’s sense of tax law and the fact that the taxpayer - as in this instance - ended up paying tax on income not received.

The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge. Please sign up here.