The value-added tax rates are an issue usually taken into consideration by those interested in setting up a company in a foreign country. Denmark has a standard VAT rate of 25% and it was one of the first countries to implement this tax.
VAT registration in Denmark is performed as per certain thresholds. Companies that make taxable goods of offer taxable services are required to register once they surpass this value. For non-resident companies there is no registration threshold – these companies must register for VAT purposes.
Our team of agents who specialize in company registration in Denmark can provide investors with complete information on the current VAT registration procedures, the liabilities and the responsibilities that fall onto registered legal entities.
How to register a company for VAT purposes
Companies that surpass the VAT registration threshold of 50,000 DKK are required to register for value-added tax purposes. Company VAT registration in Denmark is expected to last for approximately three weeks from the moment of the application submission. Investors should know that application is to be made at least 8 days prior to starting to do business within the country. This involves filling in a form and uploading it on the Danish business authority website, which may then lead to additional documentation being solicited.
We recommend setting up a Danish company instead of a branch
, because of the company formation procedures in Denmark
being fast and cost-efficient, as well as offering numerous advantages; in this sense, it may only take a few hours instead of weeks to register for VAT
. Investors should note that failure to comply with VAT registration in Denmark
might result in fines of various values. Likewise, applications that include incorrect or insufficient information can also be subject to penalties in the form of fines.
The general registration process includes the following steps:
- fill in the application: the first step is to obtain a Danish NemID; this also means registering the company with the authorities.
- provide documents: along with the registration form, the applicant also submits passport copies or other relevant identification documents.
- notice: the registration certificate with the Danish authorities is sent at the indicated postal address.
- compliance: once the company is registered for VAT purposes, the taxable individual is required to declare the VAT accordingly, for each taxable period.
Investors who open a company in Denmark will need to include these procedures when estimating the time required for starting a new business.
VAT declarations and the payment of VAT in Denmark
A taxpayer’s VAT account reflects the amount that needs to be declared and paid. In its simplest form, this account includes two entries: for input VAT (the one paid on purchases) and the output VAT (the one received upon sale).
VAT statements are to be submitted for each VAT period. Once a company obtains the Danish VAT number
it must comply with the general rules for filing the statements online. For this purpose, the taxpayer will use the online tool provided by the Danish Tax Agency
, the TastSelv Erhverv (available in English and Danish). The Tax Agency functions under the Ministry of Taxation
Investors in Denmark should know that in the event in which they forget to declare their due value-added tax, the authorities will calculate the due amount automatically. Certain fees and interest may be charged in these cases. Our agents who specialize in company formation in Denmark can provide more information on these provisions and the penalties that may apply when business owners do not declare VAT properly.
VAT payments are made when the declaration is submitted and this takes place via a bank transfer (the Tax Agency must indicate the account for the payment). Resident companies will have a Danish bank account and in their case this step is a simplified one as the transfer can take place via online banking.
As far as the VAT return deadlines, the following list includes the dates:
- - 1 July – 31 December 2019: no later than 2 March 2020.
- - 1 January – 3 June 2020: no later than 1 September 2020.
- - 1 July – 31 December 2020: no later than 1 March 2021.
Newly incorporated companies or those that have opted for quarterly VAT returns are required to observe the following schedule:
- - 1 October – 31 December 2019 2 March 2020.
- - 1 January – 31 March 2020: 2 June 2020.
- - 1 April – 30 June 2020: 1 September 2020.
- - 1 July - 30 September 2020: 1 December 2020.
- - 1 October - 31 December 2020: 1 March 2021.
One of our agents who specialize in VAT registration in Denmark can provide investors with more information about these filing dates and the other possible options, such as monthly settlements and their deadlines for the current year.
When filing a VAT return via the E-tax for business, the aforementioned portal, TastSelv Erhverv, applicants are required to know the value of the input and output VAT as well as if they are subject to special categories, such as when doing business with foreign customers. In those situations in which the company did not purchase or sale goods during the entire VAT period, then the applicant will file a Zero VAT return.
It is useful to know that certain corrections can be made to the VAT return, on the same day as it was made before 4 pm. The correction made within this timeframe is immediately updated. It is advisable to correct only one period at a time, as needed. One of our agents who specialize in VAT registration in Denmark can provide more details on how to submit corrections.
VAT policy for non-resident companies in Denmark
There are certain situations in which VAT registration will be required even without opening a company in Denmark, as per the Danish legislation; these are most often similar throughout EU countries, and it will be applied when:
- - importing goods into the European Union countries via Denmark;
- - buying and selling goods within Denmark;
- - using local warehouse facilities in order to trade goods on the Danish market;
- - distance online sales involving individuals in Denmark.
VAT rates in Denmark
As mentioned above, Denmark applies a standard VAT rate of 25%, in accordance with the EU VAT directive, and has no reduced rates. Nevertheless, there is an exemption that applies to certain supplies, a.i. newspapers etc.
There are certain goods and services that are exempt from VAT, such as:
- - hospital treatments and medical practice;
- - charity and social security work;
- - educational activities, as long as they are not aimed at businesses and made for the purpose of profit;
- - cultural activities related to museums, libraries or zoos; not so in the case of radio and TV broadcast, or live performances, which are subject to VAT;
- - rental and leasing of property, with the exception of rooms in hotels or advertising space;
- - insurance services ;
- - financial activities ;
- - postal services.
These activities, while VAT exempt, incur a payroll tax instead of between 3.08 - 9.13 % of the payroll.
Certain activities and goods may be subject to 0% VAT, yet the supplier may still recover input VAT on related costs, as is the case with:
- - export of goods to non-EU countries, as well as transport services and processing related to export;
- - supply of goods to EU countries, when the acquirer is VAT registered in another EU state;
- -ships of more than 5 gross tons, as well as their permanent equipment, fuel, or provisions;
- - activities related to aircrafts (sale, reconstruction, repairs, maintenance, etc) used by airline companies operating mainly on international routes.
Moreover, certain activities may be considered out of scope transactions and will not be subject to VAT, since they are not regarded as economic activities. This includes:
- - receipt of dividend income;
- - purchase and sale of shares.
Persons subject to taxation may be entitled to deduct VAT costs on activities such as:
- - import VAT on goods from non-EU territories;
- - acquisition VAT on goods from other EU countries;
- - VAT on goods and services purchased from other taxable persons.
VAT deductions in Denmark
Companies in Denmark are allowed to deduct VAT when they purchase goods or services that will be used in direct connection to running the business. The purpose of the purchase will need to be determined and it is important to note that the goods or services may not be used for personal or private purposes, only in connection to the business.
As part of the deduction process, the company will need to keep and show the purchase invoice (that will contain all of the regular information such as the date, the seller’s VAT number and details, the quantity and type of goods, the price, VAT rate and VAT amount). This is the main supporting document for obtaining the deduction and if the amount is below 3,000 DKK, a simple invoice or a till receipt will suffice.
Investors who open a company in Denmark and are interested in making VAT deductions have the duty to ensure that they document the purchases or the deduction may be refused.
Some examples of deductions for goods related to business use include the following:
- - resale and renting goods;
- - materials used for the production of goods;
- - items that are used for repair purposes;
- - the costs for the transport of the produced goods as well as those related to packaging them;
- - a full deduction is available for goods purchased from another VAT registered business;
- - vehicle expenses, according to vehicle type (cars or motorbikes, vans of up to three tons and those above this tonnage).
The vehicle expenses that may be deducted include those related to fueling the vehicle (petrol and diesel), bridge tolls when crossing certain bridges in Denmark, parking fees and costs for the repair and maintenance of the vehicle. One of our agents who specialize in company formation in Denmark can provide you with more details in specific cases, such as those for car rental businesses or motoring schools.
VAT on investment assets can also be deducted. This can occur when a company owner purchases property or spends more than 100,000 DKK on a yearly basis for the maintenance and repair of property just as well as when purchasing machinery. Purchasing operating equipment or machinery also qualifies as an investment asset. Some of the issues to take into consideration when applying for this type of refund are the following:
- - following up and adjusting the tax deduction according to the investment asset, depending on its nature; it is important that the VAT deduction corresponds to the ongoing use of goods;
- - adjusting the VAT deduction for the investment asset if the relationship between the sales that are subject to VAT and the sales that are exempt from VAT changes.
- - following up on the VAT deduction during the period of adjustment: five years for machinery, fitting and furniture and ten years for real estate (including renovations and additions).
Following up on the VAT deduction for the investment is necessary almost every year during the adjustment period to make sure that the use of the asset corresponds to the VAT deduction that was claimed. Our team can help investors who wish to open a company in Denmark and rely on this VAT deduction in order to purchase equipment or other necessary items.
Taxation in Denmark
Companies in Denmark are subject to the value-added tax, with the aforementioned rates. However, other taxes for companies include the following:
- - 22%: this is the usual corporate income tax; for companies in the oil and gas sectors the tax is 25%.
- - 27%: this is the withholding tax on dividends paid to a non-resident company; however, the final rate is 22% as 5% can be reclaimed.
- - 22%: this is the withholding tax for interest and royalties, under certain conditions.
- - 10,000 – 12,000 DKK: the value of the social security contributions payable by the employer per employee.
- - 0.6% - 1.5%: the stamp duty for the registration of the transfer for certain types of assets; an additional fee applies to this percentage.
Please keep in mind that this is only a shortlist of taxes for corporations. Below, our agents who specialize in Danish company formation describe the main tax reporting requirements that apply in the country.
The tax year in Denmark is generally the same as the calendar year, however, it can be another 12-month period if the taxpayer chooses so. Companies are required to file the tax returns within six months of the end of the fiscal year. The advance payment for tax is usually between 20 March and 20 November and voluntary payments between 21 November and 1 February in the following year are possible. Company owners should remember that penalties apply for late filing or the failure to file the tax returns. Affiliated companies, as well as branches of foreign companies, are subject to tax consolidation. Affiliated companies may opt for international tax consolidation.
For more information regarding the VAT
or other special taxes, please contact
our experts in company formation in Denmark