The High Court of Western Denmark

An employee received a tax claim for an otherwise tax-free travel allowance due to the reason that the employer, according to SKAT, had failed to fulfill its control obligations. The employee subsequently claimed the tax claim against his employer and the High Court of Western Denmark held that the employer was liable thereof .[i]

The circumstances of the case

In May 2013, A was hired as a construction manager in the company B. A was to manage large building projects around Denmark. In the employment contract, it was agreed that A should provide transport for himself to the construction sites in his own car against receiving tax-free travel allowance in accordance with the state's tariffs.

A submitted a monthly statement to B specifying his transport for business purposes in his own car, and only once did A receive comments from B regarding the statements. 

In November 2016, SKAT informed A that they would not accept A's travel allowance for 2014 and 2015 of DKK 103,000 and DKK 76,000, respectively, as tax-free. According to SKAT, this was due to the fact that B had not performed a satisfactory control of A's driving statement. As a result thereof, A had to pay an amount of just above DKK 82,000 to SKAT.

In this specific case, it was subsequently assessed whether A could raise the tax claim against B.

Current legislation

In accordance with the consolidation Act no. 173 of 13.03.2000 on travel and transport allowance, it is a prerequisite for tax-free travel allowance that the employer performs control of the employee's number of kilometers traveled. It is a requirement that any receipts regarding work/business related driving must include the date of the driving as well as the number of kilometers driven.

It is therefore only the employer who can ensure that the requirements for tax-free travel allowance are met. 

Comments of the High Court of Western Denmark

In this specific case, the Court assessed that A's tax claims were solely due to B's ineffective control of A's travel records. The Court further assessed that the miscalculations that A had made in the calculation of distances would have been discovered, if B had carried out the checks effectively.

On this basis, the Court found that B was liable for A's loss, corresponding to the tax claim of just above DKK 82,000. The Court upheld the District Court's ruling.

Bird & Bird's comments

The judgment emphasizes the importance of conducting a monthly review of the employees' travel records. The control is important to avoid any miscalculations. If the travel record contains any miscalculations which result in a tax claim and if the mistake could have been discovered by the employer, the employer may - based on this judgment - eventually be liable for the tax claim.

It is also important that the supporting receipts forwarded to SKAT contains the information requires in the statutory order, including the name of the recipient as well as the address and the social security number, the purpose of the journey, the date of the journey, the destination and any other destinations on the route, the number of kilometers driven, the rates applied and a calculation of the travel allowance.

[i] Judgement from the Danish High Western Court of 7th February 2019, case number: BS-8263/2018-VLR (U2019.1630V)

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