Gross negligence - The Supreme Court rules against taxpayers

30 November 2018

Anders Kiærskou, Manager, Tax |

In a recent ruling, the Supreme Court concluded that a married couple’s filing of Danish tax returns as non-residents constituted acts of gross negligence.

The issue of negligence in relation to the act of filing tax returns as non-residents when the taxpayers were in fact resident in Denmark for tax purposes - as determined by the High Court and the District Court before it - pertains to the Danish tax authorities’ option of re-opening older tax assessments.

Generally, tax assessments can be re-opened until 1 May in the 4th year following the income year. Re-opening of older tax assessments requires specific circumstances.

Acts of gross negligence exercised by the taxpayer or a representative leading to incorrect tax assessments warrants re-opening of older tax assessments.

In its ruling, the Supreme Court reversed the ruling of the High Court, which came to the opposite conclusion, thus reaffirming the relative ease with which the Danish tax authorities can re-open older tax assessments when the taxpayer has failed to declare all taxable income.

In addition to the tax consequences of the ruling, the taxpayers had to pay 1,500,000 DKK to the Ministry of Taxation to cover legal representation before the courts.

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.