The Danish Tax Assessment Act, section 3: Principle of Reality in a New Guise?

Carsten Lund Sørensen

Student thesis: Master executive thesis


Effective1 January 2019, Denmark has its first national general anti abuse rule (GAAR), as the EU-directive “Anti-Tax Avoidance Directive” (ATAD) was implemented in the Danish Tax Assessment Act. Until then Danish legislation had only had a GAARs in relation to the EU-directives and double taxation treaty and a not statutory Principle of Reality when it came to override events in the case of tax evasion.
This master-thesis wishes to disclose whether implementation of ATAD into Danish law has contributed to material changes, if the changes are coexisting with the Principle of Reality or if the implementation of ATAD has resulted in a termination of the Principle of Reality.
The preparatory works were very general and did not contribute to significant extent to the interpretation of application of the provisions. The Danish Ministry of Taxation was very reluctant to come up with specific answers to questions asked in connection with the bill, which has led to considerable uncertainty regarding the application of the provisions.
Through analysis of the preparatory works, Legal Guidance and decisions of the Danish Tax Council in relations to the GAAR, the EU Court also regarding the GAAR and the Danish Supreme Court in regards to the Principle of Reality the significance of the GAAR has been tried to be elucidated and compared to the results of the application of the Principle of Reality.
The findings of this master-thesis are that the uncertainty regarding the application of the provisions not necessarily are as great as first assumed. It seems that the biggest differences appear in the extend the tax authorities must prove circumvention exists. The rulings from the Danish Supreme Court regarding the Principle of Reality seems to have set the bar for when events can be overridden in relation to tax evasion and implementing a national GAAR does not change that.
The EU Court has earlier been considered to have higher standard as to when an arrangement was believed to be an expression of tax evasion than Danish case law. However, the EU Court has in its newly rulings regarding beneficial ownership lowered the bar, and only time will tell if this means, that the Principle of Reality will be terminated as the GAAR in Danish law is an implementation of an EU-directive.

EducationsMaster i Skat, (Executive Master Programme) Final Thesis
Publication date2020
Number of pages48