When a case involving taxes, VAT, and duties becomes a criminal case.

Authority of the Danish Tax Agency

When the Danish Tax Agency has issued a decision that alters a tax assessment or a VAT/duties liability assessment (hereafter referred to as a “tax case” for the sake of simplicity) … is the case then over and done with as far as the Agency is concerned?

This will depend on whether the Danish Tax Agency determines that a violation of legislation pertaining to taxes, VAT, or duties has occurred.

If the Danish Tax Agency believes that an offence has been committed, either through gross negligence or deliberate evasion, a punitive measure may be invoked.

The Danish Tax Agency has authority in all criminal cases in which it believes gross negligence to have been involved.

If the Agency believes that deliberate tax evasion is involved, it has authority to deal with the criminal case only when the amount of evasion does not exceed:

  • DKK 250,000 for violations of tax legislation, the VAT Act, the Labour Market Contributions Act, and the Payroll Tax Act
  • DKK 100,000 in violations of excise duty laws

If the deliberate evasion exceeds these amounts, the Agency must refer the case to the Police. Any ensuing criminal case will be decided by the courts.

The Danish Tax Agency may issue penalties only in the form of fines and may do so only if the company/individual accepts them. If the fine is disputed, the company or individual is are entitled to have the penalty assessed by the courts.

What are the considerations if punitive measures might be invoked?

When you become involved in a tax case as a company or individual, you should always consider whether criminal proceedings could ensue.

When processing a tax case, the Danish Tax Agency does not always provide a clear indication whether it will assess it with a view to potential punitive measures. In some cases, the decision is not made until the Agency has issued a ruling about the adjustment to the tax assessment or the liability for VAT/duties.

A company or individual might decide to accept the ruling for many reasons. This does not necessarily mean that you agree with the ruling. Acceptance may simply reflect an unwillingness to spend the necessary resources on fighting the case through the administrative appeals process and the courts. However, once you have accepted the ruling, you may be at a disadvantage if the Agency then decides to initiate criminal punitive proceedings. Your acceptance can be represented as an expression of agreement with the Agency’s decision.

You should therefore take this into consideration when deliberating whether to accept a Tax Agency ruling or to appeal the ruling and/or pursue it through the courts.

Once the case is closed because the deadline for lodging a complaint or for appealing the ruling has passed, all hope is not lost even if the Tax Agency then initiates criminal proceedings. If it is possible to reopen the case, you may consider making such a request, and you are entitled to raise objections during the criminal proceedings.

Who has the burden of evidence?

Another important factor relates to the burden of evidence in tax cases and in ensuing criminal proceedings.

The Tax Agency has the burden of evidence when pursuing criminal proceedings. In tax cases, the burden of evidence lies with the company or individual. Evidence presented in a tax case can thus be used against the company or individual in subsequent criminal proceedings. This is an important matter to keep in mind as you are under no obligation to incriminate yourself.

As tax lawyers, we naturally consider the risk of criminal proceedings when we offer advice about how best to manage a tax case. This applies to the question whether the Tax Agency’s ruling about adjustment of a tax assessment or liability for VAT/duties should be tried in administrative courts of appeal and if so, what would be the best course of action if there is a threat of criminal proceedings.

Do you need to discuss a case that involves taxes and liabilities?

The professionals at Hejm Vilsgaard Advokater have extensive experience with criminal proceedings arising from tax cases. Should you wish to discuss your case, you are always welcome to contact us directly. Call (+45) 7930 1710 or send us an email at info@hvlaw.dk. We always respond quickly.