Appeals court cuts tax fine from 5.3 million to 640,000 krónur

Iceland’s Landsréttur appeals court has reduced a man’s sentence for tax and accounting offences committed through a private limited company, mbl.is reports. His suspended prison term was cut from five months to 30 days, and his fine from nearly 5.3 million krónur to 640,000 krónur. The prison sentence remains suspended for two years.

The court acquitted him of part of the tax charges, finding that prosecutors had not proved he issued 14 sales invoices while he was the company’s managing director and board member. The ruling was issued on November 5.

The case concerned his responsibility for the company’s tax returns and accounting from October 1, 2015, to January 11, 2016. He was accused, along with another man, of failing to file value-added tax returns for September and October 2015 and to pay 5,259,669 krónur in VAT. The amount was based on 16 sales invoices.

The man argued that the company had not traded while he was in charge and that he had issued no invoices. He said someone else may have issued them later and backdated them. He also pointed to records showing the company had changed its name: the invoices used its new name despite being dated before the change.

Landsréttur said the dates of 14 invoices could not be verified. Investigators had not included copies in the case file, and bank statements did not show whether or when the invoices had been paid. Both men had also said the company’s invoices were backdated. The court therefore gave the defendant the benefit of the doubt over whether any of the 14 were issued after he left the company’s board.

The court reached a different conclusion on two invoices issued in September 2015 under the company’s former name. Copies were available, and their issuance had been confirmed during the investigation. The VAT on those invoices totalled 643,132 krónur.

The court held the man responsible for filing the VAT return and paying the tax due on the two invoices. He could not avoid that responsibility simply by claiming that the other man was supposed to handle the tax filings. The court also noted that he had repeatedly withdrawn cash from the company’s bank account in the second half of 2015, indicating he was aware of transactions that appeared to arise from business activity.

He was also convicted of accounting offences because no books had been kept for the company and its accounting records had not been properly retained. Reykjavik District Court had convicted him over the full tax amount and imposed a five-month suspended prison sentence and a fine of 5,259,669 krónur. Landsréttur narrowed the tax conviction to the two invoices.