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VAT in Denmark

Updated on Friday 20th March 2020

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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.
 

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:
 
  1. fill in the application: the first step is to obtain a Danish NemID; this also means registering the company with the authorities.
  2. provide documents: along with the registration form, the applicant also submits passport copies or other relevant identification documents.
  3. notice: the registration certificate with the Danish authorities is sent at the indicated postal address.
  4. compliance: once the company is registered for VAT purposes, the taxable individual is required to declare the VAT accordingly, for each taxable period.

VAT declarations and the payment of VAT in Denmark 

 
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.

 

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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. 

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

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