CL-2018-000297, CL-2018-000404, CL-2018-000590, - [2025] EWHC 2364 (Comm)

Form 06.003 was entitled “Claim to Relief from Danish Dividend Tax”. That reflects, indeed it states, the nature of the process. Each instance involved a claim to receive a payment from public funds, made to an organ of the state with responsibility for those funds whose decision whether to meet a claim was final, unless a challenge to that decision was put before a Danish Tax Tribunal by a party with standing to challenge it under Danish law. It was not a negotiation or discussion, and it was for SKAT to choose what information it required to be provided and the basis upon which any decision whether to pay would be made.

When it was signed and submitted by a Tax Agent, as was always the position here, the simple statement made by Form 06.003 was that on behalf of a “beneficial owner” identified on the Form, the Tax Agent as applicant made a claim “for refund of Danish dividend tax” in an amount stated in DKK. That did not represent to SKAT that the Tax Agent’s named client was entitled to such a refund; nor did SKAT allege such a representation. It was SKAT’s function to decide for itself upon what basis it would accept and pay Danish dividend tax refund claims. The Form did not require the named client or the Tax Agent on its behalf to certify entitlement, or belief in entitlement. In the absence of any such requirement in its specified Form, SKAT could not reasonably have understood that the Tax Agent was making a statement to it, intending it to rely on the statement, that the named client was (or believed itself to be) entitled.

Likewise, SKAT did not allege a representation that the Tax Agent’s named client had incurred, or believed it had incurred, liability to Danish dividend tax. There may be room for the view that an assertion of tax liability was implicit in the making of a refund claim or claim for relief. However, if that view were taken, there would then be an important issue whether that was again in the nature of a contention by the Tax Agent on behalf of its client, rather than a statement that SKAT could reasonably have thought was being made to it as a positive assertion, on which it was intended to rely, of the true position under Danish tax law. These matters were not explored at trial since an implied representation of tax liability (or belief as to tax liability) was not how SKAT put the case.

None of the representations alleged by SKAT was stated in terms in the Form or in any CAN. The submission for SKAT was, in substance, that it would reasonably be expected to be looking only to pay where there was entitlement to be paid, and therefore things said in the Form or a CAN should reasonably be taken to have conveyed that which would have to be the case for there to be an entitlement. I do not accept the premise, and in any event the conclusion does not follow: “I claim a Danish dividend tax refund” does not translate as or imply “I hereby state to you that the requirements of Danish tax law for entitlement to the tax refund sought are satisfied”, or “I hereby state to you that the facts are [whatever the facts have to be for there to be entitlement]”.

SKAT’s contrary argument was set out for closing as follows:

“76.

A reasonable tax authority in SKAT’s position would naturally have only wished to pay ‘refunds’ of withheld dividend tax where the requirements under its national tax law for a valid WHT refund application were in fact satisfied.

77.

… the Court has held in the Validity Issues Judgment that, in order to be entitled to a refund of withheld dividend tax from SKAT under Danish tax law:

77.1

The WHT Client must have been entitled to a dividend when declared by a Danish company;

77.2

By virtue of being a shareholder (for tax purposes) of the relevant Danish company when the dividend was declared;

77.3

Such that the WHT Client suffered a withholding of tax on such dividends by the Danish company.

78.

The background to each WHT Application was that:

78.1

a reasonable representee in SKAT’s position would be expecting that that Application and the documents supporting it would be informing SKAT that the WHT Client was entitled to a dividend on shares held in a Danish company and had suffered a withholding of tax on such dividend, of which a ‘refund’ was being sought; and

78.2

any person applying for a refund would wish to represent and demonstrate those matters to SKAT.

79.

This is the context in which the statements relied on by SKAT in the documents comprising the WHT Applications … fall to be interpreted, including:

79.1

The Tax Refund Form which identified the amount of tax withheld of which a “refund” was sought on behalf of a named WHT Client;

79.2

The DCAs which specified the number of shares on which the gross dividend had been declared, the net dividend paid to that WHT Client, and a figure for tax or tax withheld.

80.

Moreover, the meaning of shares, dividends and tax in the context of a WHT Application is necessarily driven by the meaning of those concepts in Danish tax law. That is how a reasonable representee in SKAT’s position would have understood them as a tax authority in the context of an application for a refund of withheld Danish dividend tax.”

SKAT’s paragraph 76 was a baldly asserted conclusion for which no evidence was cited that might justify it as a finding of background fact. It is the premise to which I referred in paragraph 441 above. I found in SKAT (Validity Issues) that even if SKAT had established what might otherwise be an administrative practice, as known to Danish public law, it could not have bound itself to pay tax refund claims in circumstances where the requirements of s.69B(1) of the Danish Withholding Tax Act, as I found them to be, were not satisfied (ibid, at [97] to [101]; and the Appendix at [9]). That means that if SKAT had adopted a continuous and consistent course of deliberate conduct by which it accepted and paid tax refund claims where one or more of those requirements was not met, it always remained open to SKAT to refuse any such claim. It does not mean that SKAT must reasonably be taken not to have made policy choices about when it would accept and pay that might involve it paying claims where it knew that the requirements of s.69B(1) were not all met, or the information available to it did not establish that those requirements were met.

There was evidence that a policy approach of that kind was known to be taken by the Belgian tax authority at the time. SKAT noted that the known approach in Belgium did not extend to treating dividend compensation payments as taxable dividend income if they were payments made between parties neither of whom ever acquired any shares, but that does not prevent the Belgian example from undermining SKAT’s bald general assertion as to the approach it should be assumed a national tax authority would be taking when construing tax refund claim documents to identify what, if any, representations were made by them to that authority.

Similarly, SKAT’s Legal Guide, taken at face value since SKAT proffered no other evidence on the point, evidences a choice by SKAT to treat as irrelevant whether trading giving rise to a tax refund claim involved short selling or stock lending (see paragraph 293 above). That also contradicts SKAT’s bald assertion about context, and again that is so even though SKAT was correct to submit that the Legal Guide did not provide reason to think, more specifically, that the share-less trading involved in this case might generate a valid tax refund claim (see paragraph 296 above).

SKAT’s paragraph 78 likewise was a bare argument unsupported by evidence. It also proves too much. If true, the conclusion would be that a representation of entitlement was made by the submission of a tax refund claim. The reality is that SKAT asked for its Form 06.003 to be used, and therefore would reasonably expect to receive, neither more nor less, whatever use of that Form would mean it received, and a person making a tax refund claim using the Form would be expecting to provide to SKAT whatever the Form required it to provide, neither more nor less.

I also disagree with SKAT’s paragraph 80, to the extent it was meant as a submission that words used in Form 06.003 or in CANs submitted to SKAT should be read as having specialist Danish tax law meanings. To assess whether a tax refund claim met the strict requirements of s.69B(1), if that had been its approach, SKAT would have needed to consider whether the claim had been made by or on behalf of a shareholder for Danish dividend tax purposes when the dividend in question was declared. It does not follow that if the tax refund Form asked for information about the named client’s position, SKAT could reasonably think that the user of the Form would intend their language to have specialist Danish tax law meanings if that was not explained by SKAT in the Form, or in notes or guidance for completing it. For example:

I was therefore not persuaded that SKAT’s specific submissions about context had any force. It can be said, as a more general statement as to context, that when considering communications to SKAT from a Tax Agent on behalf of a client, relating to a particular type of income tax collected by it, SKAT might reasonably be expected to be interested in information about income of that type earned and/or received. That could influence how what was submitted to SKAT might reasonably be expected to be understood by it. However:

That answers SKAT’s reliance on the well-known “helpful test” articulated by Colman J in Geest plc v Fyffes plc [1999] 1 All ER (Comm) 672 at 683B of considering “whether a reasonable representee would naturally assume that the true state of facts did not exist and that, if it did, he would necessarily have been informed of it”. In oral closing argument in reply on this part of the case, Mr Graham KC put that reliance as follows on Day 82:

“We say that a reasonable Danish Tax Authority would expect that if a named client did not own any Danish shares and had not received any dividends from a Danish company and had not suffered any withholding of any dividend tax, then they would not be submitting a DCA in the form they did as part of an application for a refund of withheld dividend tax. …

On any view, … against the background of that conduct [the submission of a claim] and those words [the content of a DCA] a reasonable tax authority would expect to be told if there were no shares, no dividend and no withholding of tax.”

That argument, if well founded, might perhaps lead to a conclusion that there was an implied representation that the Tax Agent’s client had owned shares on which it had earned a dividend on which it had been taxed. However, SKAT alleged different representations, and as Mr Head KC put it in a submission for the DWF Ds, the trial would have been a different trial if it had been about materially different alleged representations.

Submissions by defendants as to context focused on the fact that a national tax authority does not operate in an ivory tower or a vacuum, and I agree. It would reasonably be expected to have a general knowledge of the international legal and market environment in which any WHT refund scheme operated by it sat. Thus, SKAT would reasonably be expected to be aware that DTTs on the OECD model used a Treaty notion of the ‘beneficial owner’ of dividends, not tied to or based on the legal concepts of any national system of law, to locate possible entitlement to tax relief. Such DTTs did not stipulate, in terms, for such an entitlement. They imposed Treaty obligations not to levy tax on dividends, either at all or above a specified maximum tax rate, where the ‘beneficial owner’ of the dividends was within a relevant Treaty category. The entitlement to relief therefore needed to be provided if Denmark was to comply in substance with those Treaty obligations, since (so far as material) it taxed dividends at source by a general withholding tax obligation imposed on the company and attaching to the dividend declaration.

It was also to be expected that SKAT, acting reasonably, would be aware of the information and guidance it had published concerning Danish dividend tax and the availability of tax relief on the basis of DTTs. I dealt with that as part of setting out the basic facts, at paragraphs 286 to 296 above, and referred to it also at paragraph 445 above. SKAT would also be expected to be aware that it could require further information from those seeking tax refunds from it, including if it considered that to be necessary to ensure (if this was its aim) that it only paid where there was a refund entitlement under Danish tax law.

As a national tax authority collecting dividend tax on a withholding basis and operating a process for dividend tax refund claims to be made to and paid by it, SKAT reasonably would have been expected to be aware and to have a general understanding of common equity trading practices. In receiving and processing dividend tax refund claims during the relevant period, SKAT would reasonably have been expected to be aware, therefore, of stock lending, short selling, deferred settlement, and (in outline at least) div-arb, including tax arbitrage and cum-ex, as practices engaged in by parties trading in equities markets.

SKAT reasonably would have been expected to be aware as a result that, as was in fact the position:

Finally, SKAT would reasonably have been expected to be aware that a shareholder in principle entitled to dividend income from a Danish company (it may be via a chain of custody) might in various ways transfer that entitlement or its benefit to another, so that even the receipt of real dividend income was not always tied to share ownership. Indeed, that was implicitly recognised in the beneficial ownership element of DTTs, the Treaty obligation being not to tax (or not to tax above a certain rate) where the beneficial owner of the dividend qualified under the DTT. It was also recognised explicitly by SKAT itself in Form 06.008, use of which it still accepted, in that it allowed for claims by owners or usufructuaries. (I have said it would be inappropriate to allow SKAT to rely on wording in Form 06.008 to found any of its alleged representations, having pleaded no such reliance. That does not mean I should ignore this evidential value of the Form on a matter going to context.)