The City Court of Copenhagen rules in favour of IT consultant in tax and VAT case

The Ministry of Taxation and Economic Growth brought the case before the court after the National Tax Tribunal (Landsskatteretten) overturned the Danish Tax Agency's assessment and found that the consultant was carrying on an independent business.

The Ministry of Taxation and Economic Growth had argued that the case was of principal importance for all IT consultants in general if using agencies to refer customers.

On behalf of the IT consultant, Plesner successfully argued that cases like this must be viewed on a case-by-case basis, that the income was not employment income for tax purposes, and that the consultant was a taxable person under the Danish VAT Act. The court placed particular weight on the fact that the consultant's business entailed a genuine risk in relation to payment and liability and was not prevented from performing services for other customers.

The judgment has not been appealed by the Ministry.

The case sets an important first precedent in relation to recent efforts by the tax authorities to narrow the possibilities for consultants to work as independent contractors rather than employees and further illustrates that the classification of consultancy arrangements depends on a case-specific assessment of the terms and circumstances of each engagement.

Following the judgment, the Ministry has also withdrawn a separate test case concerning the classification of a consulting engineer.

The Plesner team was led by Jef Nymand Hounsgaard and the case was argued by Line Johanne Østergaard Andersen.