The government seeks to increase the rule of law for taxpayers

29 September 2017

Anders Kiærskou, Manager, Tax |

A new bill proposes to increase the rule of law when it comes to binding rulings on the valuation of assets.

According to current Danish tax law, a binding ruling on the valuation of assets shall not bind the Danish tax authorities if it can be substantiated - based on a subsequent sale of the asset or from the size of return from the asset - that the actual value of the asset, at the time the binding ruling was issued, diverged at least 30 pct. and at least DKK 1,000,000 from the value in the binding ruling.

This rule was introduced in 2015 along with the general anti-avoidance rule.

The new bill proposes to remove this possibility for the Danish tax authorities to withdraw binding rulings regarding valuation of assets in certain cases, when the assumptions for the answer were correct.

The aim of the bill is to increase the predictability and clarity of the tax position for taxpayers, who receive a binding ruling from the Danish tax authorities on valuation of assets.

Although a step towards greater certainty for taxpayers, a binding ruling is not binding for the tax authorities, if the assumptions for the answer were incorrect.

Consequently, a binding ruling does not provide absolute certainty on the valuation of assets - especially, if the asset is traded at a value that is significantly different from the value in the binding ruling shortly after the binding ruling has been issued, and this should have been expected at the time, the binding ruling was issued.

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.