VAT in Denmark

Updated on Tuesday 13th December 2016

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When considering setting up a company in a foreign country, entrepreneurs naturally take into consideration the VAT levels. Denmark has a standard VAT rate of 25%. Denmark introduced the Value Added Tax in 1967, making it one of the first countries to use VAT
 

VAT policy for non-resident companies in Denmark 

 
In certain cases, even without opening a company in Denmark, you may have to register for local VAT, according to 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.
 

How to register a company for VAT purposes

 
Company VAT registration in Denmark may take around three weeks to be completed from the moment of the application submission. As a general rule, the application must be made at least 8 days prior to beginning 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
 

 

Standard VAT rate 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 a exemption which applies to certain supplies, a.i. newspapers etc. 
 

VAT exemptions in Denmark

 
As mentioned above, 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.
 

VAT deductions in Denmark 

 
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. 
 
 
For more information regarding the VAT or other special taxes, please contact our experts in company formation in Denmark
 

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