20 November 2015

Bill to amend the Act on recovery of debt adopted after SKAT's problems with EFI 

New bill suspends time-barring of SKAT's recovery of debt for three years.

As a consequence of SKAT's problems with recovery of debt due to failing IT systems, including the EFI system which has been subject to extensive press coverage, the Danish parliament has adopted a bill concerning suspension of the time-barring of all debts recovered by SKAT.


Several detailed analyses of the functionality of SKAT's recovery systems have proved a number of serious and less serious errors, which have resulted in SKAT's wrongful recovery vis-á-vis some debtors. In addition, the analyses proved that the systems contain errors limiting the use of SKAT's recovery potential. A number of debts transferred to EFI are subject to uncertainty as to whether these debts are still enforceable and whether they have been calculated correctly or have been mixed together with other debts. The problems do not seem to end, and there is an acute need for a solution, which can rectify SKAT's insufficient, wrongful and incorrect recovery of debt to public authorities.

On 7 October 2015, a bill was introduced for the purpose of giving SKAT a break so that it may get an overview of the chaotic situation and find an effective solution without existing debts being forfeited due to time-barring. A new section 18 a will be inserted in the Act on recovery of debt:
Section 18 a. As regards debts, including interest, fees and other costs, subject to recovery with the debt recovery authority on 19 November 2015 or later, the period of limitation will start to run at the earliest from 20 November 2018.


The amendment will affect all enforceable debts to be recovered by SKAT, meaning that they are not time-barred on 19 November 2015 when the Act comes into force. The amendment concerns debts, including interest, fees and other costs, e.g. costs relating to enforcement proceedings. Both recovery of SKAT's own debts and debts transferred to SKAT under section 2 (3) of the Act on recovery of debt to public authorities are covered by the provision.


The provision is only important in relation to foreign debt being recovered in Denmark if the time-barring of the foreign debt is subject to Danish legislation on limitation. The provision is extended with the effect that it also applies to Danish claims for taxes and duties for recovery in another member state. However, the provision does not apply to foreign states' claims for taxes and duties being recovered by SKAT.

The provision does not imply that debts time-barred prior to the coming into force of the Act will revive.


The provision implies that time-barring of debt will be suspended in the period 19 November 2015 to 20 November 2018. This suspension will have the same effect as a suspension of the time-barring period, meaning that a new time-barring period will start to run after the suspension, and the duration of this period will be determined based on section 19 of the Limitation Act, i.e. corresponding to the original time-limit of the debt. This applies irrespective of whether the time-limit was originally 3, 5 or 10 years. The earliest date when time-barring occurs in relation to a debt covered by the Act is then 21 November 2021, unless actions have been taken prior to the expiry of the time-limit, which will once again suspend the time-barring.

After having discovered the errors in SKAT's system, SKAT has suspended the use of the automatic recovery and is now recovering debts manually. In addition to manual recovery being very demanding in terms of both time and resources, there is a risk of unintended time-barring as it is practically not possible to suspend the time-barring of all debts. The adoption of the bill will prevent additional unintended time-barring, which will limit the resulting reduced proceeds.


It is assessed in the bill whether the provision will administratively and financially affect the public and private sector, and it has been concluded that the only consequence will be that companies with debt to public authorities may experience that the debt is maintained for a longer time than according to the general rules on time-barring.

During the second reading in the parliament, the bill was criticised for having a number of problems of due process and for creating increased uncertainty for the citizens in relation to their financial situation. Further, there are concerns that SKAT must be allowed this possibility in order to avoid losses as a consequence of the time-barring of debt even though it is SKAT that has placed the citizens in this situation. The extended periods of limitation must not appear as a pretext for inaction postponing SKAT's solution to its problems.

Irrespective of the criticism, the bill was adopted unanimously by the attending members of parliament, and the provision will come into force on 19 November 2015.


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