Denmark Tax Agency Clarifies Taxation of Compensation Paid by Bank for Unjustified Debt Collection

The Danish Customs and Tax Administration Feb. 19 posted online National Tax Court Decision No. SKM2026.90.LSR, clarifying the taxation of compensation paid by a bank for unjustified debt collection. The taxpayer, an individual, received compensation from a bank in 2023 for excessive debt and interest charged due to system errors. The Tax Agency treated the compensation as taxable individual income, holding that the payment didn’t represent a refund of a specific overcharged amount, but rather general compensation calculated using an automated model. The taxpayer argued that the compensation was a tax-free refund of amounts previously recovered from the sale of ...