Customs and Excise Duties

A customs case often begins with the Danish Customs Agency requesting material relating to one or more imports.

This may include invoices, transport documents, contracts, evidence of origin or information about the commodity code applied.

If the agency then takes the view that the company has paid too little in customs duties, a claim for post clearance recovery may follow.

In these cases it is essential to review the individual imports and the basis on which the agency has formed its assessment.

That applies in particular where the case covers a longer period or a large number of imports, since a change to the commodity code alone may result in a substantial overall claim.

All imported goods must be assigned to the correct commodity code.

This may sound straightforward, but for many products the tariff classification is far from obvious.

The material, function, composition and intended use of the goods may all affect which code applies.

At the same time, the difference between two commodity codes may mean a significant difference in the duty payable.

If the Danish Customs Agency considers that the company has used an incorrect commodity code over a longer period, the consequence may therefore be a considerable additional assessment.

In such a case it should be examined specifically whether the agency's classification of the goods is in fact correct.

Customs duties are, as a starting point, calculated on the basis of the customs value of the goods.

In many ordinary transactions the starting point will be the price actually paid for the goods.

Questions may nevertheless arise as to whether other amounts must be included, for instance transport costs, commissions, royalties or other payments connected with the imported goods.

Customs value cases can become particularly complex where buyer and seller are related parties.

In that situation the Danish Customs Agency may question whether the agreed price can form the basis of the customs calculation.

An excise audit may cover several years and a large number of transactions.

The Danish Tax Agency may examine whether the company has been correctly registered, whether duty has been accounted for on the right goods, and whether the calculation and reporting have been carried out correctly.

If the agency considers that the company has paid too little excise duty, a substantial claim for additional payment may follow.

In that situation it should be examined whether the goods and quantities relied on by the agency are correct, and whether the rules have been applied properly.

The same applies where the agency seeks to reverse a refund of duties previously granted.

Companies importing goods from countries outside the EU must as a starting point be registered as importers. On registration the company receives an EORI number, which is used in customs processing.

When goods are imported into the EU, several matters must be addressed, including the tariff classification, the origin and the customs value of the goods.

Those three questions may directly determine how much the company has to pay in customs duties.

An incorrect commodity code may, for example, lead to the application of an incorrect rate of duty. Likewise, the origin of the goods may determine whether they benefit from a preferential arrangement or other special customs rules.

The customs value may also give rise to disagreement, in particular where payments, commissions, royalties, transport costs or transactions between related parties are involved.

The customs origin of goods may be just as important as the country from which they were physically dispatched.

Goods sent from one country may well originate in another.

Origin may affect the rate of duty and whether the goods are covered by a trade agreement or other preferential terms.

It may therefore be necessary to document where the goods were produced, which materials were used and what processing was carried out.

Inadequate evidence of origin may result in a previously applied customs benefit being refused.

Companies exporting goods to countries outside the EU must as a starting point be registered as exporters, and an export declaration must be prepared.

Evidence that the goods have in fact left the EU may also affect the VAT treatment of the sale.

It is therefore important that exports are both handled correctly for customs purposes and capable of being documented afterwards.

Excise duties are special duties on particular goods and services.

They apply, among other things, to alcohol, tobacco products, chocolate and confectionery, certain energy products, packaging and a range of environmentally burdensome products.

The rules vary considerably from one category of goods to another.

A company may therefore be subject to a registration obligation even though excise duties are not its principal line of business.

That may be the case, for instance, where the company imports dutiable goods from abroad for resale or for use within the business.

Where a company manufactures, processes, trades in or imports goods subject to excise duty, it may be required to register for the relevant duty.

How the company must be registered depends on the specific goods and on the way in which the company trades.

Different rules apply, among others, to companies that produce or store goods and to companies that receive dutiable goods from abroad.

It is important to put the registration in place from the outset.

A failure to register does not necessarily mean that the duty liability disappears. On the contrary, the Danish Tax Agency may subsequently collect the duty that the company should have declared and paid.

Trade in dutiable goods across borders requires particular attention.

Some excise duties are governed by harmonised EU rules, including a number of alcohol, tobacco and energy products.

Where such goods are moved between EU countries, there may be requirements as to registration, the provision of security and the way the movement is documented.

For certain goods the EU's electronic EMCS system is used to monitor movements of excise goods.

Errors in the movement or in the documentation may affect where and when the duty falls due.

Companies also pay a range of energy taxes through their purchases of electricity, gas and other energy products.

VAT registered companies may in a number of situations obtain a full or partial refund of the tax.

The amount that may be refunded depends among other things on the form of energy and on how the energy is used.

The rules in the energy field change over time, and it is therefore important to take as the starting point the rules applicable to the specific period.

This may give rise both to cases where the Danish Tax Agency refuses a refund previously obtained, and to situations where the company itself should examine whether it is entitled to a further reimbursement.

A customs or excise case may in certain circumstances take on a criminal dimension.

That applies in particular where the authorities consider that the company or its management has intentionally or through gross negligence provided incorrect information or failed to declare customs or excise duties correctly.

Both a financial claim against the company and a question of criminal liability may therefore arise.

HAY LAW works with tax and duty matters as well as with economic crime, and can therefore handle the case as a whole if an audit develops into criminal proceedings.

If a decision is upheld in the appeal system, the case may be brought before the courts.

Court proceedings concerning customs or excise duties place high demands both on the legal argument and on the evidence presented to the court.

We therefore assess at an early stage which issues should be maintained and how the case is best prepared should it end up in court.