On 8 July 2022, the Eastern High Court issued a ruling in a landmark case concerning the refund of vehicle registration fees. In 2016, a car dealer applied for an export refund for a number of vehicles. The refund was initially denied by the tax authorities, who argued that documentation proving the vehicles had been exported from Denmark was not available at the time of the application.
The Eastern High Court ruled that the right to an export refund is not forfeited if documentation of export is only provided after the dealer has approved the monthly VAT return for the month in which the refund application is submitted.
Bachmann/Partners Advokatpartnerselskab represented the dealer in the case, which had been referred to the Eastern High Court as a precedent-setting matter.
For an extended period, the Danish Motor Vehicle Agency (Motorstyrelsen) maintained the position that self-reporting taxpayers must document that a vehicle, for which an export refund is requested, has been exported from Denmark at the time the refund application is submitted. In December 2019, the National Tax Tribunal (Landsskatteretten) upheld Motorstyrelsen’s interpretation in three separate decisions.
Bachmann/Partners Advokatpartnerselskab appealed the National Tax Tribunal’s decisions on behalf of the dealer. On 8 July 2022, the Eastern High Court issued its ruling, rejecting the legal position previously upheld by Motorstyrelsen and Landsskatteretten. The Court concluded that the interpretation of the export refund rules advocated by the Danish Tax Ministry required a clear legal basis, which was not supported by the wording of the relevant provisions in the Vehicle Registration Tax Act nor by the legislative preparatory work.
The ruling raises important considerations regarding the authorities’ interpretation of the Vehicle Registration Tax Act. Both Motorstyrelsen and Landsskatteretten had adopted an interpretation lacking support in either statutory text or preparatory materials. On the contrary, the legislative history indicated that proof of export could be provided through documentation such as registration in another country. According to the Court, such documentation is often only available after a monthly VAT return has been approved.
The Eastern High Court’s ruling of 8 July 2022 overturns the previous practice of the tax authorities. As a result, there is now a basis for both ordinary and extraordinary reassessment under the Tax Administration Act for self-reporting taxpayers who were denied export refunds on the grounds that documentation of export was not available at the time of application. It is expected that Motorstyrelsen will issue guidance on reassessment. The ruling will also impact ongoing cases before the Tax Appeals Agency concerning the same issue.
Extraordinary reassessment may be sought by car dealers for periods starting from January 2016, which was the period under review in the High Court case that overturned the authorities’ practice.
For car dealers seeking extraordinary reassessment, a six-month deadline applies, counted from the publication of Motorstyrelsen’s guidance on reassessment. Bachmann/Partners Advokatpartnerselskab nevertheless recommends acting as quickly as possible, as experience shows that guidance on reassessment is often issued long after a judgment overturning prior practice.
Bachmann/Partners Advokatpartnerselskab provides advice on all matters related to vehicle registration tax. For further information on the ruling and its implications, please contact Christian Bachmann at +45 30 30 45 21 / chb@bachmann-partners.dk, Diana Mønniche at +45 20 71 78 62 / dme@bachmann-partners.dk, or Peter Hansen at +45 40 32 35 35 / pha@bachmann-partners.dk.
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