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Partial Tax Amnesty Bill – Where do You Stand?


According to a draft bill, presented to the Danish Parliament on 14 March 2012, a reduction of the penalties for certain forms of tax evasion will be available in the period of 1 July 2012 to 30 June 2013. The reduction of the penalty allows Danish tax residents to inform the Danish Tax Authorities of foreign income which have not yet been disclosed by the tax payer. Taxand Denmark examines this proposal by the Danish authorities to reduce penalties for tax evasion.

The bill provides taxpayers, that have undisclosed funds in foreign banks, the possibility of declaring their income to the Danish Tax Authorities at a reduced penalty and with no risk of a prison sentence.

Currently, tax evasion is subject to penalties ranging from fines to prison for up to eight years. Generally, fines are set at twice the taxes payable. Evading taxes of more than DKK 500,000 (app. EUR 67,200) generally results in imprisonment.

The draft bill calls for the establishment of a system allowing for a Danish tax resident, owning funds placed on accounts or deposits in financial institutions in foreign jurisdictions to submit information concerning their foreign funds and the income from those funds. The bill applies to funds located in countries considered to be tax havens by the Danish Tax Authorities, including Switzerland and Liechtenstein as well as several Caribbean jurisdictions. The bill does not apply to funds located in EU member states other than Austria, Belgium and Luxembourg.

No matter the size of the tax evasion, the maximum fine cannot under the proposed tax amnesty amount to more than 60 per cent of the Danish taxes payable on the income. In addition to the fine, however, interest is levied on the taxes payable. No criminal charges will be made and the risk of a prison sentence is avoided.

To make use of the scheme, information concerning identity and address, the income years in question, the size of the undisclosed income, the income source in question and the country in which the funds have been placed, must be submitted using an online form.

Taxand's Take

The scheme provides a possibility of coming clean with the Danish tax authorities with no court involvement against the payment of an administrative fine, which is easily calculated. No criminal charges will be made. This ensures that any publicity about the case can be avoided.

In recent years the Danish network of information exchange treaties has come to include a number of countries considered to be tax havens and information from a number of countries, from which no information was previously provided, and may in the future be available to the Danish Tax Authorities.

Furthermore, multiple initiatives aimed at tax evasion through the use of foreign bank accounts have been carried out by the authorities in reason years. Projects called Money Transfer and Credit Card resulted in the Danish Tax Authorities so far levying as much as DKK 500 million (app. EUR 67.2 million) in taxes on hidden foreign income. In light of their success, these efforts are likely to continue in the future.

On this basis the scheme presented should be considered, by Danish tax payers with undisclosed foreign funds, as a way of avoiding more severe consequences and potential publicity.

Your Taxand contacts for further queries are:
Anders Oreby Hansen
T. +45 72 27 36 02

Poul Erik Lytken
T. +45 72 27 35 31



Taxand's Take Author