Individual taxpayers, who have failed to report income to the Danish Tax Agency and consequently evaded taxes, can normally expect a reduced penalty if they subsequently declare the income on their own initiative.
However, you should only expect a reduction of the fine if the Danish Tax Agency is not already onto you.
Individuals relocating to Denmark from abroad should take extra care in making sure that their Danish tax return is complete, as they often own taxable assets abroad and earn income from these assets that may not automatically be reported to the Danish Tax Agency.
Deliberate tax evasion is generally sanctioned with a fine, which is normally calculated as equal to the part of the evaded taxes not exceeding DKK 60,000 and twice the amount of evaded taxes exceeding this threshold.
If the total evaded taxes exceed DKK 250,000, the individual taxpayer may face a prison sentence and an additional fine equal to the entire amount of evaded taxes. Besides the fine, the taxpayer will also have to pay the evaded taxes, the corresponding residual tax surcharge and interest.
If you report your own tax evasion, you can expect a reduced penalty. If the evaded taxes do not exceed DKK 100,000, no fines are issued, and the case will be settled, when you have paid the evaded tax, the corresponding residual tax surcharge and interest.
If the evaded taxes amount to more than DKK 100,000 but less than DKK 250,000, you risk a fine equaling the evaded taxes, but you can avoid a prison sentence.
Should the evaded taxes amount to more than DKK 250,000 but less than DKK 500,000, you risk a suspended prison sentence and an additional fine amounting to 50 pct. of the evaded taxes.
If the evaded taxes exceed DKK 500,000, you risk a prison sentence and an additional fine amounting to 50 pct. of the evaded taxes.
The reduced penalties associated with reporting your own tax evasion do not apply, if the Danish Tax Agency is already onto you.
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.