On 2 December 2024, a leasing company, with the assistance of Bachmann/Partners Law Firm, prevailed in a case establishing that the Danish Ministry of Taxation was not entitled to charge full registration tax on leased vehicles registered with proportional registration tax. The judgment has not been appealed by the Ministry of Taxation.
Det forhold, at betalingen af den ekstraordinære førstegangsydelse skete via modregning hos forhandleren, som leasingselskabet havde købt køretøjet af, kunne ikke i sig selv bevirke, at leasingaftalerne skulle anses for ikke at være reelle.
The fact that the payment of the extraordinary initial installment was made via set-off with the dealer from whom the leasing company purchased the vehicles could not in itself render the leasing agreements non-genuine. The case concerned whether there was a basis to charge full registration tax on three vehicles, where the leasing company could not document whether the lessees had paid the extraordinary initial installment and the first regular lease payment to the dealer at the time of delivery.
The leasing company had acquired the vehicles from a dealer. It was agreed between the leasing company and the dealer — as was customary at the time — that the leasing company could offset its claim for the extraordinary initial installment and first regular lease payment against the purchase price owed to the dealer. The dealer was then responsible for collecting these payments from the lessees upon delivery of the vehicles.
During court proceedings, there was agreement between the leasing company and the Ministry of Taxation that the leasing company had not demonstrated that the lessees had paid the initial installments to the dealer. However, the court found that this alone could not render a leasing agreement non-genuine or void.
The court noted that the leasing company had received payment of the initial installment via the mentioned set-off, and that this was recorded in the company’s accounting.
The court further found that the leasing agreements contained the information required under section 3 b, subsection 10, of the then-applicable Registration Tax Act, and therefore there was no basis to charge full tax on the vehicles.
Our Assessment
In assessing the genuineness of leasing agreements, the Danish Motor Vehicle Agency must, to a much greater extent than is currently the case, be familiar with civil law rules. When three unanimous judges of the lower court correctly justified the judgment on ordinary property law principles, it is reasonable to require the Agency to conduct a similar civil law assessment.
Once the leasing company has received payment, the lessee’s financing of the lease agreement is irrelevant to the assessment of the agreement’s genuineness.
The court’s reasoning shows that transferring the claim for the initial installment to a car dealer is a standard contractual option under obligations law and does not affect the financial settlement of the lease agreement between the parties, as it does not change the amounts or timing of payments the lessee must make. Such a transfer cannot be regarded as a modification of the Motor Vehicle Agency’s approved standard contracts, so they should not be considered void.
There are several similar cases in which the Motor Vehicle Agency has demanded full registration tax because the leasing company could not document whether the lessee had paid the initial installment to the dealer. Following the judgment, published as SKM2024.647.BR, it is possible to request reopening of comparable cases.
It is the Motor Vehicle Agency’s responsibility to ensure there is a secure legal basis for charging full registration tax when a vehicle is leased from a leasing company to a lessee. This can have significant consequences for a leasing company if full tax is imposed in such a situation. Therefore, the Agency should exercise considerable restraint when the legal basis is uncertain. No such legal basis existed in this case.
Bachmann/Partners Law Firm can assist with any requests for reopening or other matters relating to registration tax. For further information about the judgment and its implications, contact Diana Mønniche at tel. 20 71 78 62 / dme@bachmann-partners.dk or Peter Hansen at tel. 40 32 35 35 / pha@bachmann-partners.dk.
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