Tax and VAT Criminal Case Exceeding DKK 4 Million Closed Without Prosecution

The question was whether the director could be held criminally liable

The Danish Tax Agency had raised questions about the company's treatment of payroll tax and VAT in connection with the use of external labour suppliers.

On that basis, our client was charged with gross evasion of tax and VAT for a total amount exceeding DKK 4 million.

We argued that a distinction had to be made between the tax assessment of the company's circumstances and the question of whether the director personally had acted in a way that could give rise to criminal liability.

The fact that there may be grounds for a tax adjustment does not in itself mean that there are also grounds to punish the company's director.

No charges against the client

After reviewing the case, the prosecution agreed that there was no basis to proceed with the criminal case against our client.

No charges were therefore brought for the alleged evasion of payroll tax and VAT exceeding DKK 4 million.

The result meant that a serious criminal case against the client was closed without prosecution.

A tax claim and criminal liability are two different questions

The case illustrates an important distinction in tax criminal law.

A tax decision on, for example, the failure to withhold payroll tax, labour market contributions or VAT cannot automatically lead to personal criminal liability.

In a criminal case, an independent assessment must be made of whether the person concerned acted with intent or gross negligence, and whether there is otherwise sufficient evidence to link the person to the specific circumstances.

This also applies to directors and business owners. Overall management responsibility is not in itself sufficient to establish criminal liability.

Particularly relevant when using temps and subcontractors

Cases concerning payroll tax and VAT often arise in companies that use external temps, assistants or subcontractors.

Among other things, questions may arise as to whether persons should be treated as employees for tax purposes, whether the company should have withheld payroll tax and labour market contributions, and whether there is a right to deduct VAT.

If the case subsequently develops into a liability case or criminal case, the question of personal criminal liability must be assessed separately.

Involved in a tax criminal case?

We assist in tax criminal cases concerning, among other things, payroll tax, A-tax, labour market contributions, VAT, subcontractors and alleged evasion of tax and VAT.

If you have been charged, have received a notice of a liability case, or your case has been referred to the prosecution, you are welcome to contact us for a confidential and non-binding assessment of your case.