A binding response is an official statement from the tax authorities on how certain matters will be treated for tax purposes. Binding responses provide taxpayers with certainty about how their tax situation will be assessed and can protect them from subsequent changes to the tax assessment, as long as they follow the given guidance. Binding responses are not issued concurrently with pending tax cases or reopening cases.
Frequently Asked Questions About Binding Responses
What is a binding response?
A binding response is a decision from the Danish Tax Agency (Skattestyrelsen) that establishes how a specific transaction should be treated for tax purposes. The decision provides legal force and certainty for the person making the request.
Who can request a binding response?
Both private individuals, businesses, associations, and organizations can request a binding response. It is also possible to request on behalf of others, for example as an advisor or representative.
What is the fee for a binding response?
The fee for a binding response is 400 DKK.
How long does it take to process a binding response request?
Processing time varies, but most cases are decided within 3 to 6 months, depending on the complexity of the case.
What types of matters can a binding response cover?
You can get a binding response on both planned and already completed transactions. A binding response can concern tax, VAT, or duties.
Can I request a response on behalf of someone else?
You can also request a response on behalf of others if the transaction has tax significance for them.
Are there any limitations on what can be covered?
Questions about customs legislation cannot be processed as binding responses. If the case is of a principal nature, the response is issued by the Tax Council (Skatterådet), which typically makes decisions within 5-6 months.
Can binding responses be issued for transactions that have already been completed?
Yes, binding responses can be issued for transactions that have already been completed. There is no fixed time limit going backward.
Are there any conditions for responses on past transactions?
However, the Danish Tax Agency assesses whether the actual circumstances can still be documented and whether the case has real tax significance. If circumstances have changed significantly since the transaction, or if the documentation can no longer be verified, the request may be rejected.
What documentation is required for past transactions?
A binding response can therefore only be issued if the information on which the response is based is still current and sufficiently substantiated.
How long is a binding response valid?
A binding response is generally binding for up to 5 years from the time the response is issued.
What happens if circumstances change during the validity period?
This means that the Danish Tax Agency is obligated to follow the decision as long as the actual circumstances and assumptions on which the response is based have not changed. If subsequent changes occur – for example in legislation, in practice, or in the specific circumstances of the applicant – the binding effect ceases wholly or partially. However, the Danish Tax Agency may choose to extend the validity if this is expressly stated in the response or if a new binding response is requested on the same matter.
What happens if the request does not contain all relevant information?
If the request does not contain all relevant and essential information, the Danish Tax Agency can either reject the request or issue a limited response.
Why is complete information important?
A binding response must be based on a complete and correct foundation – therefore it is important that you present all facts, documents, agreements, and assumptions that you are aware of.
What are the consequences of missing information?
Missing information can lead to the response not having binding effect if it later turns out that the circumstances were different from what was stated.
Can the Tax Agency request additional information?
The Danish Tax Agency can also request supplementary information during case processing; if this is not submitted within the deadline, the request may be rejected as incomplete. Therefore, it is important that all relevant facts, documents, and circumstances are included in the request.
Can I appeal a binding response?
Binding responses are administrative decisions, and there is therefore the possibility to appeal to the Tax Appeals Agency (Skatteankestyrelsen), which is the administrative appeals body in the tax area, if you believe that an error has been made in the substantive decision or in the case processing.
What if the appeal is unsuccessful?
If the Tax Appeals Agency upholds the Danish Tax Agency's assessment, the case can ultimately be brought before the courts.
When can the Tax Agency refuse to issue a binding response?
The Danish Tax Agency can refuse to issue a binding response if the question is not sufficiently specific but appears as a theoretical or hypothetical issue. The same applies if the request lacks essential information or documentation, or if the case is already under processing, audit, or control by the Danish Tax Agency. In addition, a binding response can be rejected if the question concerns tax matters for other persons or businesses that have not given consent for the question to be asked on their behalf.
Disclaimer
As the above is for guidance purposes only, we accept no liability for decisions that may be made based on the above without prior individual advice. We accept no liability for errors and omissions.