Bachmann/Partners Advokatpartnerselskab has assisted a client in a principled case concerning whether a majority shareholder should be taxed on an amount for which the majority shareholder’s company had been denied a tax deduction. In 2017, SKAT decided that the majority shareholder should be subject to dividend taxation on amounts for which the company had been denied deductions for the income years 2013 and 2014.
In 2023, the National Tax Tribunal changed SKAT’s decision and found that there were no grounds for subjecting the majority shareholder to dividend taxation. The Ministry of Taxation brought the National Tax Tribunal’s decision before the courts, and in a judgment of 10 April 2026, the District Court in Glostrup referred the case back to the Danish Tax Agency for renewed consideration. The case was heard by three judges at the District Court in Glostrup.
There is extensive case law concerning situations in which a majority shareholder company is denied a tax deduction under Section 6(1)(a) of the Danish State Tax Act. In many cases, the majority shareholder is subject to dividend taxation when the majority shareholder company is denied a deduction under Section 6(1)(a) of the Danish State Tax Act.
The case before the District Court in Glostrup concerned a majority shareholder who had operated a business in corporate form involving the purchase and sale of metal scrap. The majority shareholder company purchased scrap from collectors, who were primarily of Eastern European origin. These collectors were paid in cash by the company upon delivery of the collected metal scrap. In order to continuously maintain sufficient cash reserves, the majority shareholder regularly withdrew substantial amounts from the company’s accounts.
The purchase of goods was not sufficiently documented with settlement vouchers, which is why SKAT could not accept the deduction. The National Tax Tribunal upheld SKAT’s decision in this regard. However, there were accounting records showing that the majority shareholder company had incurred expenses for the purchase of metal scrap, and the accounting records also showed that the company had sold metal scrap to larger recycling companies.
SKAT found that the majority shareholder should be subject to dividend taxation on the undocumented expenses for the purchase of goods – namely metal scrap. The National Tax Tribunal concluded that SKAT had not discharged the burden of proof that there was unreported revenue, and therefore found that there was no basis for subjecting the majority shareholder to dividend taxation.
The reasoning of the National Tax Tribunal could advantageously have been formulated differently. First, the case did not concern whether the majority shareholder company had failed to report revenue, as the revenue was documented by invoices, deposits into bank accounts, and accounting records. SKAT had not disputed the revenue either. SKAT merely denied that a deduction could be granted for the purchase of goods – that is, metal scrap. Second, the burden of proof assessment in the National Tax Tribunal’s decision was also not consistent with case law. It was presumably these circumstances, and in particular the latter, that led the Ministry of Taxation to bring the National Tax Tribunal’s decision before the courts.
By judgment of 10 April 2026, the District Court in Glostrup referred the National Tax Tribunal’s decision back to the Danish Tax Agency for renewed consideration.
The District Court in Glostrup stated that the majority shareholder bore the burden of proof that the cash withdrawals, which were used for the purchase of metal scrap, were applied as part of the operations of the majority shareholder company, and that he therefore should not be subject to dividend taxation. This assessment of the burden of proof is consistent with established case law in this area.
The Court found that it must be assumed that settlement by cash payment at that time, in 2013 and 2014, was not atypical for the scrap industry.
The Court also found that the information in the prepared summary vouchers did not in itself constitute documentation that all of the withdrawn cash amounts had been used for the purchase of goods.
However, the Court found that the majority shareholder’s explanation regarding the purchase of metal from foreign sellers was supported by the information in case notes prepared by SKAT in connection with the inspection carried out in 2015.
The Court therefore found it established that the withdrawn amounts had, at least to some extent, been used to pay for purchases of goods in the interest of the majority shareholder company. Neither the principal claim of the Ministry of Taxation nor that of the majority shareholder was upheld, as the Court referred the case back to the Danish Tax Agency for renewed consideration. The Court found that the Danish Tax Agency should determine the amount by which the disguised dividends for the years 2013 and 2014 should be reduced in light of the majority shareholder company’s estimated expenses for the purchase of goods.
Bachmann/Partners Advokatpartnerselskab assists with all tax and duties matters. Please contact Peter Hansen at tel. +45 40 32 35 35 or pha@bachmann-partners.dk regarding the judgment
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