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.
|We offer VAT registration services||
|Who needs VAT registration||
Companies offering goods or services subject to VAT exceeding DKK 50,000
|Time frame for registration||Approximately 3 weeks|
|VAT for real estate transactions||
Hospital, medical, dentistry services, education, cultural and artistic activities, renting and leasing immovable property, the supply of immovable property, insurance and reinsurance services, passenger transport, foreign exchange and securities transactions, etc.
|Period for filing||Monthly filing and payments when the annual turnover exceeds DKK 50 million; a quarterly term applies when the annual turbover is between DKK 5 million and DKK 50 million and a bianual filing and patment when the turnover is below DKK 5 million|
|VAT returns support||Upon request|
|VAT refund||In certain cases, such as when the goods or services are acquired for commercial use or wgen the business is based in a coutnry outside the EU. Refunds are limited and do not apply to purchases related to food for the business owner and emploiees, ongoign accomodation for the business owner and employees, entertainment purchases, the acquisition or repair and operation of motor vehicles for less than nine persons.|
|Local tax agent required||EU, Norway, Iceland, Faroe Islands or Greenland businesses are not required to register for Danish VAT through a fiscal represnetative, although they can choose to do so.|
Danish VAT registration for a foreign company
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:
- the company offers services for private individuals in Denmark;
- the company provides services to a registered Danish company that is not under the reverse change regime (other than exempted services, please see below);
- the company hires sub-contractors and they provide services to the foreign company during its activities in Denmark.
The types of services provided to a Danish company for which the registration is not compulsory can include those in connection with the transport of persons, restaurant and catering services or services related to immovable property.
Our team can give you more details about these types of services and help you with a case-by-case evaluation, depending on the types of services your foreign company providers to a Danish company.
The general VAT registration for a foreign company in Denmark is done by filling out a special form, the one for a non-Danish company.
Upon the successful completion of the registration, the foreign company will receive a registration certificate that will include its Danish VAT number, the SE number.
This number of mandatory and essential for the VAT-related activities and the subsequent invoicing.
The Danish VAT number issued to a foreign company is sent to the applicant’s indicated postal address.
Foreign companies providing VAT-taxable services in Denmark should note that the registration needs to take place no later than 8 days before the company starts the provision of the services in Denmark.
Like local business entities, foreign companies are also subject to a fine if they fail to submit their VAT registration application in due time, or if they provide incorrect or incomplete information.
Our team of Danish lawyers specializing in tax matters can help foreign companies and their appointed representative in Denmark when registering the legal entity for VAT purposes.
In some cases, it can be useful to draw up a power of attorney with our help, effectively appointing one of our agents to act on the company’s behalf for VAT matters, in front of the Danish authorities.
If you would like to know more about the VAT registration process for a foreign company, please reach out to our team.
VAT registration for a local company
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.
Companies that have a revenue of less than the threshold in force, DKK 50,000, can also opt to register for VAT on a voluntary basis.
As for companies that register as a mandatory condition, companies that volunteer to register will need to charge, declare and pay VAT, even if their sales remain less than DKK 50,000.
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: 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 settlement deadlines for 2023/24, the following dates are relevant:
- 1 July – 31 September 2022: no later than 1 December 2022.
- 1 October – 31 December 2022: no later than 1 March 2023.
- 1 January – 31 March 2023: no later than 1 June 2023.
The monthly VAT deadlines for 2023/24 take place as per the following schedule:
- 1 – 31 December 2022; 25 January 2023;
- 1-31 January: 27 February;
- 1-29 February: 27 March;
- 1-31 March: 25 April;
- 1-30 April: 25 May;
- 1-31 May: 26 June;
- 1-30 June: 17 August;
- 1-31 Jury: 25 August;
- 1-31 August: 25 September;
- 1-30 September: 25 October;
- 1-30 November: 27 December;
- 1-31 December 2023: 25 January 2024;
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 rates in Denmark in 2023
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.
In some cases, the business will also need to make other registrations, in addition to the VAT registration in Denmark. This applies when:
- the business imports goods from outside the European Union (and it will be registered as an importer);
- the business rents commercial property and charges VAT on the rent (a special form that is only available in Danish is required in this case).
You can also watch the following video for details:
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 in 2023 and rely on this VAT deduction in order to purchase equipment or other necessary items.
VAT deregistration in Denmark
Companies that stop providing services that are subject to value-added tax will be interested in deregistering.
This needs to take place within 8 days from the moment when the company stops providing the services.
Once this is complete, the company will no longer be able to provide the services subject to VAT according to law, and it will effectively be close in terms of the scope of this tax.
The form for de-registration is sent to the Danish authorities, electronically or via regular post.
Foreign companies that stop providing VAT-taxable services can be the ones most interested in this procedure.
If this is the case, our team of Danish tax experts can assist during deregistration.
When the same business needs a VAT number again, it is possible to request the same number when it decides that it will start to provide VAT-taxable services again.
A company that re-registers for VAT will need to comply with the same 8-day period for submitting the request prior to the re-commencement of the activities.
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.
Investors who plan to open a company in Denmark in 2023 can reach out to us for complete information on the taxation regime, any updates and new requirements that may be imposed by the authorities as a response to the global coronavirus pandemic.
The incorporation procedure remains just as straightforward for foreign investors, however, if you are unable to travel to the country, our team can take care of the majority of the procedures.
We can also assist with post-registration steps that may be needed in addition to the VAT registration.
For more information regarding the VAT or other special taxes, please contact our experts in company formation in Denmark.