Limitation of Tax Claims

The starting point under the Danish Limitation Act is that a claim becomes time-barred after three years unless a special period applies.

That does not mean that every tax claim automatically lapses three years after the income year it concerns.

The limitation period runs from the point at which payment could be demanded, and a number of exceptions and special rules apply in tax matters.

It is therefore necessary to know the full history of the claim before assessing whether it is time-barred.

In tax cases it is important to distinguish between the deadline for changing a tax assessment and the period during which the resulting claim may be enforced. These are two separate questions.

The rules of the Danish Tax Administration Act govern how far back the Danish Tax Agency may go in amending a tax assessment or a VAT or duty liability.

The limitation rules, by contrast, concern how long the monetary claim can be enforced. Both may be relevant in the same case.

Where the Danish Tax Agency wishes to amend an income year far back in time, it should be examined both whether the authority was entitled to reopen that year and whether the resulting claim can still be enforced.

The ordinary limitation period is three years and generally runs from the point at which the creditor could demand payment.

In tax matters the starting point therefore depends on the type of tax or duty involved and on when the specific claim fell due.

It is not always sufficient to look at the income year or the period the claim concerns. The actual due date must be established.

Special rules apply to claims arising from an extraordinary tax assessment.

Where the Danish Tax Agency amends an assessment extraordinarily under section 27 of the Danish Tax Administration Act, a longer limitation period may apply to the resulting claim. The same applies to claims arising from an extraordinary determination of VAT or duties under section 32.

It may therefore be of considerable importance whether a case is handled under the ordinary rules or under the rules on extraordinary reopening.

In these cases the question of limitation is often closely connected to whether the authority had any basis for reopening the case extraordinarily.

Extraordinary reopening is often used in cases where the Danish Tax Agency considers that the taxpayer acted intentionally or with gross negligence.

If the conditions are met, the authority may amend income years that would otherwise be closed under the ordinary deadlines. That may in turn affect the limitation of the resulting tax claim.

The question of gross negligence is therefore not only a question of culpability. It may determine how far back the authority can go and which rules govern the subsequent claim.

It should always be assessed specifically whether the error or omission relied on by the authority can genuinely be characterised as grossly negligent.

In certain cases a longer limitation period may apply because the existence and size of the claim have been established in a particular way.

That may be the case where the claim has been acknowledged in writing or established by judgment, settlement or another special legal basis meeting the conditions of the Danish Limitation Act.

What has actually been determined must be assessed specifically. Not every decision or letter from an authority triggers a longer limitation period.

The limitation period generally runs from the point at which payment could be demanded, and in tax matters this varies from claim to claim.

Residual tax may, for instance, be payable in several instalments with different payment dates, while VAT and duties have other due dates.

Different parts of what appears to be a single claim may therefore be subject to different limitation periods.

When we assess limitation, we therefore take each individual claim and its actual due date as the starting point.

Even where a limitation period has begun to run, the claim is not necessarily time-barred when the original period expires. Limitation may be interrupted.

That may happen where the debtor acknowledges the debt, or where the authorities take certain legal or enforcement steps.

When limitation is interrupted, a new period may begin to run. The full history must therefore be reviewed, not only the original date of the claim.

Deferral of payment and pending appeals or court proceedings may affect the calculation of limitation.

Where a dispute about the existence or size of the claim is brought before an administrative authority or the courts before the period expires, special rules govern the earliest point at which limitation can occur.

A tax claim may therefore still subsist even though more than three years appear to have passed. The actual course of the case must always be examined.

Where a tax claim has been transferred for collection with the Danish Debt Collection Agency, special rules on limitation of public debt apply.

This matters because the ordinary three-year period cannot simply be applied to debt that is, or has been, under public collection.

Over a number of years, special rules have been introduced on the calculation of limitation periods for claims held in the collection systems of the Danish Debt Collection Agency.

In a case concerning old tax debt it should therefore be examined when the claim was transferred for collection, how it has been registered, and which steps the agency has subsequently taken.

Where the Danish Debt Collection Agency seeks to enforce a claim that you consider time-barred, the question should be examined quickly.

This may arise in connection with wage withholding, set-off or other enforcement measures.

Whether the claim is time-barred does not depend on its age alone. The entire collection history and the relevant limitation rules must be reviewed.

Where a dispute about the existence or size of a claim is heard by an administrative appeal body or by the courts, special rules on limitation and additional periods apply.

A claim does not necessarily become time-barred while the parties await a decision.

Limitation must be assessed together with the specific appeal or proceedings and the full timeline of the case.

Limitation of the ordinary tax claim does not necessarily mean that every issue in the case has been concluded. Special rules may apply where the case also has a criminal dimension.

This underlines that limitation should not be assessed in isolation where the Danish Tax Agency at the same time alleges intentional conduct or gross negligence.

HAY LAW works with both tax cases and tax criminal cases and can therefore assess the different parts of a case together.