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  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 6/1/2013

Denmark: VAT essentials 

Essential information regarding VAT as it applies in Denmark.


Scope and rates

What supplies are liable to VAT?


Value-added tax (VAT) is due on any supply of goods or services made in Denmark, where it is a taxable supply made by a taxable person in the course or furtherance of a business carried on by said person. Supply includes all forms of supply.


Supply does not include anything done otherwise than for a consideration. However, certain actions carried out for no consideration are deemed to be supplies; for example giving business gifts and private use of business assets if VAT has been deducted when purchasing or manufacturing the gifts.


What is the standard rate of VAT?


The standard rate of VAT is 25 percent.


Are there any reduced rates, zero rates, or exemptions?


Yes. There is an extensive list of zero rated supplies, including:


  • newspapers
  • the sale and hire of ships with a gross tonnage of 5 tons or gross registered tonnage of 5 tons or more with the exemption of pleasure boats
  • repair, maintenance, and installation work performed on ships with a gross tonnage of 5 tons or gross registered tonnage of 5 tons or more with the exemption of pleasure boats
  • necessary equipment supplied for the use in ships in foreign trade and services performed for such ships
  • the supply of provisions and other necessities to ships to be used on board or as sales to the passengers in accordance with the Danish Customs Act; cf. the EC customs regulations
  • the sale and hire of aircrafts used by airlines predominantly operating internationally (more than 55 percent based on turnover and number of kilometers flown). The Danish tax authorities hold a list of airlines operating internationally
  • repair, maintenance, and installation work performed on aircrafts used by airlines predominantly operating internationally (more than 55 percent based on turnover and number of kilometers flown)
  • necessary equipment, repair, and maintenance of this equipment used by airlines predominantly operating internationally (more than 55 percent based on turnover and number of kilometers flown)
  • services performed for aircrafts used by airlines predominantly operating internationally (more than 55 percent based on turnover and number of kilometers flown) and its cargo
  • the supply of fuel provisions and other necessities used by airlines predominantly operating internationally (more than 55 percent based on turnover and number of kilometers flown)
  • the sale and hire of aircrafts to state institutions, including the Danish Defense, and repair, maintenance, etc., of these aircrafts.

The list of exemptions includes:


  • health
  • social welfare
  • education
  • subscriptions to trade unions and other public interest bodies
  • non-profit sport, sports competitions, and physical education
  • some cultural activities (admission to museums, exhibitions, zoos, and performances of a cultural nature supplied by public bodies and eligible bodies)
  • literary, compositional, and other artistic activities
  • real estate
    • rental and leasing of real estate. However, the exemption does not cover hotel rooms, parking lots or where landlords have voluntarily VAT registered for the letting of real estate.
    • commercial sales of new buildings, new buildings with ancillary land or building sites are subject to VAT.
    • property management, such as accounting of payments and receipts of property, is subject to VAT.
  • insurance
  • finance
  • betting, gaming, and lotteries
  • certain postal services
  • passenger transport. However, the exemption does not cover transport of tourists by bus.
  • burial and cremation
  • fund-raising events by charities and other qualifying bodies
  • second-hand shops supplying only used clothes and other goods received as a gift on the condition that the sales persons do not receive salary or wages
  • services supplied by independent groups to members in certain conditions
  • investment gold
  • goods and services supplied by charitable or in other ways non-profit associations and organizations in certain conditions.

In general, it is not possible to recover VAT incurred in making exempt supplies.


What are the other local indirect taxes beside?


  • Excise duties on many products, e.g. mineral water, chocolate, , ice cream
  • payroll tax
  • insurance premium taxes

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Registration

Who is required to register for Danish VAT?


Danish Entities


If a business makes taxable supplies in Denmark over the VAT registration threshold (DKK 50,000), it will be required to register and account for Danish VAT. If it trades below the registration threshold, it can still choose to register for VAT.


The business will receive a certificate of registration with the VAT registration number, etc., from the tax authorities. In addition, the business will receive a special PIN code by separate letter. The VAT registration number and the PIN code are the company's access to declare and pay VAT electronically.


A VAT registration number is normally issued within two to three weeks.


Non-Danish Entities


The registration rules that apply to Danish entities also apply to foreign taxable persons which are making taxable supplies in Denmark. However, there is no minimum VAT registration threshold for businesses not established in Denmark.


If a business is not registered for VAT in Denmark, but sells and delivers goods from another European Union (EU) Member State to private customers in Denmark (distance sales), where the value of those sales exceeds a threshold of DKK 280,000 per year, it is required to register and account for VAT in Denmark.


Access the registration form on the Danish tax authorities' (SKAT) and the Danish business authority's website. If a company wishes to register voluntarily and tax the letting or sales of real estate, it must use a special form. The form can be found on the Danish tax authorities' (SKAT) and the Danish business authority’s web site (PDF 120 KB). (this form is only available in Danish)


Registration of Non-Danish Company Services in Denmark


All non-resident foreign companies providing services in Denmark and stationing employees in Denmark must be registered in the Danish Register for Foreign Service Providers.


Access the registration form on the Danish tax authorities' (SKAT) and the Danish business authority's commercial websites:


Are there penalties for not registering or late registration?


Businesses can receive a fine for late registration; however, in many cases the tax authorities do not claim late registration fines.


Only in case of abuse or unwillingness to register and pay Danish VAT are penalties charged.


Is voluntary VAT registration possible for an overseas company?


An overseas business that is renting out real estate in Denmark can register for VAT voluntarily in the same way as a Danish business, see above.


Companies outside the EU supplying electronic services to private persons can choose to use a special scheme and solely register in one EU country (identification member country).


If a company outside the EU chooses to use the special scheme and chooses Denmark as identification member country, the company must register for the special scheme. Registration and statements/payments must take place electronically.


Are there any simplifications that could avoid the need for an overseas company to register for VAT?


If a business makes supplies of goods or services in Denmark, then it is required to register and account for Danish VAT. However, it is possible to avoid registering and accounting for Danish VAT when making certain supplies.


In the following examples, the obligation to account for the VAT due is shifted to your customer, provided that your customer is registered for Danish VAT.


Triangulation


In a triangulation trade where a company from an EU member state acts as the middleman in the supply of goods to a Danish customer, the VAT due is accounted for by the customer.


For a description of the triangulation scheme, please see section "What rules must be complied with in order for the triangulation simplification to be applied?


Call-Off Stock


No simplification provisions apply.


Capital Items


No simplification provisions apply.


Supply and Install


If a business supplies goods and installs or assembles them in Denmark, the customer accounts for any VAT due, in effect, as an acquisition.


Reverse Charge Services


These services are covered in more detail in section International Supplies of Goods and Services.


Bear in mind that these provisions are subject to particular requirements and so you should check carefully whether you comply with them.


Does an overseas company need to appoint a fiscal representative?


A non-established taxable person established in the EU, Norway, Iceland, Greenland, and the Faroe Islands does not have to appoint a fiscal representative. However, the company can appoint a representative.


Non-established companies established in a country not mentioned above must register through a fiscal representative.

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VAT grouping

Is VAT grouping possible?


Yes. Companies carrying out fully VAT liable activities can group register regardless of whether they are legally connected. Businesses that carry out both taxable and exempt activities may only be grouped if one of the companies directly or indirectly fully owns the other companies to be included in the group.


Can an overseas company be included in a VAT group?


No. Only via a foreign established branch in Denmark.

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Returns

How frequently are VAT returns submitted?


Registered businesses are required to submit VAT returns on a monthly, quarterly or bi-annual basis depending on their taxable turnover.


Businesses with an annual turnover exceeding DKK 15 million must submit VAT returns on a monthly basis. Businesses with an annual turnover of between DKK 1 million and DKK 15 million must submit VAT returns on a quarterly basis. Businesses with an annual turnover below DKK 1 million must submit VAT returns on a bi-annual basis.


New businesses registered for VAT must submit VAT returns on a quarterly basis, unless the expected annual turnover exceeds DKK 20 million.


(Changes in the expected turnover are expected from 2014 and 2015. A bill has been presented to the Danish parliament, but it has not yet been adopted.)


Businesses which according to their turnover are required to submit VAT returns on a quarterly or biannual basis can apply to use the month or quarter as their VAT period.


Failure to submit VAT returns on time will result in a penalty of DKK 800 and penalty interest of 0.9 percent per month. If your business receives a reminder, a collection fee of DKK 65 is payable.


Are there any other returns that need to be submitted?


European Sales List (ESL)


If a business supplies goods which are shipped from Denmark or services subjected to reverse charge to VAT registered businesses in other EU Member States, it must submit ESLs. ESLs have to be completed monthly.


Intrastat Supplementary Declarations


VAT registered businesses with a value of dispatches or arrivals to or from other EU Member States which exceed a threshold of DKK 3,900,000 for arrivals and DKK 5,000,000 for dispatches per calendar year must complete supplementary declarations each month.


Failure to submit Intrastat declarations on time may result in a penalty of DKK 550.


If a business receives a purchase invoice in foreign currency, which exchange rate should be used for VAT reporting purposes? (e.g. central bank's exchange rate applicable on the date of the invoice)


When converting foreign currency into DKK, companies must use either the exchange rate on the date of supply (date of invoice), acquisition or importation or the customs duty exchange rate. The customs duty exchange rate is valid for one month at the time (unless there is a change in the rate of +/- 5 percent). The customs duty rate is based on the rate from the National Bank of Denmark on the sixth last working day of the month. The customs duty exchange rate is published on the Danish tax authorities' website: http://www.tarif.skat.dk/tariff/uc/qry/er/search.jsf?conversationId=200204.


Please note that when companies have chosen whether to use the daily rate or the customs duty rate, the choice is binding for two years.

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VAT recovery

Can a business recover VAT if it is not registered?


Yes. If you are established in another EU Member State, then you should make a claim under Directive 2008/9/EEC. If you are a non-EU business, you should recover the VAT under the 13th Directive.


EU companies must apply for the refund via the authorities in their home country. This is done electronically.


Non-EU companies must complete and submit a paper form. The claim forms are available on the Danish customs and tax authorities' website: http://www.skat.dk/getFile.aspx?Id=39972&newwindow=true. (PDF 217 KB)


A supplement form can be found at: http://www.skat.dk/getFile.aspx?ID=10735. (PDF 109 KB)


Does your country apply reciprocity rules for reclaims submitted by non-established businesses?


No.


Are there any items that businesses cannot recover VAT on?


Yes. There are certain items that you cannot recover VAT on. For example:


  • Exempt supplies: where VAT relates to both taxable and exempt supplies, businesses need to make an apportionment.
  • Non-business (including private) activities: where VAT relates to both business and non-business activities, an apportionment is required.
  • Motor cars (excluding commercial vehicles): with certain exceptions businesses cannot recover VAT on the purchase of a motor car (passenger cars).
  • Business entertainment: VAT is not generally recoverable on business entertainment costs; however, 25 percent of the VAT incurred on restaurant costs and 50 percent (expected to be increased to 75 per cent from 1 January 2014 (a bill has been presented to the Danish Parliament, but it has not yet been adopted) of the VAT incurred on hotel accommodation costs is recoverable.
  • Goods sold under one of the margin schemes for second-hand goods. There are a number of schemes which provide for VAT to be accounted for on the goods' sales margin and do not allow VAT recovery on the purchase of those goods.
  • Purchases falling within the Tour Operators' Margin Scheme. The VAT on goods and services which fall under this scheme cannot be reclaimed.

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International supplies of goods and services

How are exports of goods and services treated?


Goods


If a company sells goods to a customer who is registered for VAT in another EU Member State and the sale involves the removal of those goods from Denmark (either by the seller or its customer) to an EU Member State, then the supply is zero-rated as an intra-EU dispatch. The supplier must obtain its customer's VAT number and quote it on your invoice. It should also obtain evidence of the goods' removal from Denmark.


If a business sells goods to a customer who is not registered for VAT in another EU Member State, it will have to charge Danish VAT. If its sales exceed a certain threshold for that Member State, it may have to register in the Member State under what is known as the Distance Selling Scheme.


If a company exports goods to a customer (business or private) outside of the EU, then the supply is VAT exempt. It must obtain documentation that the goods have left the EU.


Services


If a Danish established business and supply services to a foreign business customer (B2B), in general the supply of services is taxable in the country of the recipient under the reverse charge mechanism. If however it supplies services to a private consumer (B2C), the services are in general taxable in the country of the supplier and therefore subject to Danish VAT.


The following exceptions apply to the B2B and B2C main rules as described above:


  • services involving real estate (taxable in the country where the real estate is located). However, B2B supply is subject to reverse charge
  • restaurant and catering services (taxable in the country where these services are performed. Other rules apply if these services are performed on board a ship, aircraft, or train)
  • passenger transport (taxable in our country here the transport services are actually performed)
  • admission fees regarding cultural, artistic, sporting, scientific, educational, entertainment, and similar activities, along with the ancillary services (taxable in the country where those activities are physically carried out)
  • short-term hiring of transportation vehicles (for ships maximum 90 days/for other means of transport maximum 30 days; taxable in the country where the vehicle is actually put at the disposal of the customer

The following exceptions apply to the B2C main rule:


  • intermediary services (taxable in the country where the underlying transaction is taxable)
  • intra-Community transport of goods (taxable in the country of departure). For other types of goods transportation for non-taxable customers, the place of service is the place where the transportation is actually performed
  • transportation-related services (taxable in the country where the services are physically carried out)
  • services involving movable tangible goods (taxable in the country where the activities are actually carried out)
  • services performed electronically by a VAT entrepreneur not established in the EU to non-taxable customers (taxable in the country where the customer of the service is located)
  • the following services performed for non-taxable customers that are established or resident outside the EU are taxable in the country where the customer is established:

    • the transfer of licenses and similar rights
    • advertising services
    • services performed by consultants, as well as data-processing and information-provision services
    • the obligation to refrain, in whole or in part, from pursuing a business activity
    • banking and insurance services
    • supply of staff
    • hiring out of movable property, with the exception of means of transport
    • operating natural gas and electricity-distribution systems
    • telecommunications services
    • radio and television broadcast services and
    • services performed electronically.

How are goods dealt with on importation?


When goods are imported into Denmark from outside the EU, import VAT and customs duty is due. Customs duties must be paid or secured before the goods will be released from customs' control. Import VAT must be accounted for on the VAT return.


How are services which are brought in from abroad treated for VAT purposes?


If a company buys certain services from outside Denmark, it is required to apply the reverse charge mechanism.


Under the reverse charge mechanism it is required to account for output VAT on its VAT return covering the period in which it is invoiced and it recovers this VAT as input tax on the same return.


If the company is able to recover all of your VAT, the reverse charge has no cost effect and is a VAT compliance matter only. However, if it is partly exempt, there is a VAT cost depending on the level of recovery allowed under the partial exemption method.


The reverse charge applies to most services. However, the reverse charge does not apply to the following services:


  • services related to immovable property. This includes sale, renting of and work performed on immovable property, services provided by real estate agents, etc
  • hotel accommodation
  • transport of tourist by bus (other transport of persons are VAT exempted)
  • admission to activities within the areas of art, culture, sports, entertainment, education, science, etc
  • services in relation to activities within the areas of art, culture, sports, entertainment, education, science, etc. The service will be subject to reverse charge when it is supplied to VATable persons
  • restaurant and catering services
  • short-term renting of means of transportation. Short term is defined as maximum 30 days (for ships 90 days).

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Invoices

Is a business required to issue tax invoices?


Yes


What do businesses have to show on a tax invoice?


A VAT invoice should as a main rule contain the following data:


  • date of issue
  • a sequential invoice number
  • supplier VAT number
  • supplier name and address
  • customer name and address
  • the quantity and nature of the goods/services supplied
  • tax point (date of taxable supply) if fixed and different from the date of issue
  • the taxable amount per rate
  • unit price (exclusive of any VAT)
  • rate of any discounts (if not included in the unit price and if applicable)
  • the VAT rate applicable
  • the amount of VAT payable in DKK or EUR. If the VAT amount is stated in another currency than DKK or EUR, the VAT amount in DKK or the exchange rate to DKK must be stated on the invoice.

If a company issues an invoice to a customer established in another EU member state, the invoice should contain the following data in addition to those outlined above for a domestic transaction:


  • the VAT registration number including the two-letter country code
  • information that the supply is VAT exempted by a reference to the relevant EU provision, relevant national provision or by other means, such as, VAT exempt, zero-rated, and free of VAT
  • information that the customer is likely to pay VAT by a reference to the relevant EU provision, the relevant Danish provision or just reverse charge.

Can businesses issue invoices electronically?


Yes. The authenticity of origin the integrity of the content and the legibility of the invoice must be ensured.


Is it possible to operate self-billing?


Yes, provided the supplier has reached an agreement with your customer before doing so.


Can a business issue VAT invoices denominated in a foreign currency?


Yes, but if the invoices are issued in a currency other than DKK or EUR, the amount of VAT payable in DKK or EUR or the exchange rate into DKK must be stated on the invoice.

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Transfers of business

Is there a relief from VAT for the sale of a business as a going concern?


Yes. The transfer of a business (partly or in full) as a going concern is outside the scope of VAT. There are certain conditions which must be met, for example the purchaser must be registered for VAT in Denmark at the time of the transfer (or immediately register as a consequence of the transfer).


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Options to tax

Are there any options to tax transactions?


There is an option to register voluntarily and tax the letting and selling of real estate. Once the company decided to use the option to tax, this decision cannot be revoked for two calendar years.


In addition, companies under the registration threshold (DKK 50,000) can register voluntarily and tax their supplies.

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Head office and branch transactions

How are transactions between head office and branch treated?


If a head office makes a charge for services delivered to its branch or vice versa, this is not treated as a supply for Danish VAT purposes. However, Danish VAT must be accounted for on goods moved from a head office (or branch) in another EU Member State to the branch (or head office) in Denmark.


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Bad debt

Are businesses able to claim relief for bad debts?


They are able to claim VAT back in full on established bad debts. There are special requirements to be fulfilled, cf. below. If they subsequently receive payment for the supply, then they will have to pay the VAT element to the tax authorities.

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Anti-avoidance

Is there a general anti-avoidance provision under VAT law?


No. However, the EU anti-avoidance principle is applicable under Danish law.

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Penalty regime

What is the penalty and interest regime like?


Any person who does not meet the requirements of the Danish VAT legislation through gross negligence or deliberant intent may be subject to a fine, detention, or imprisonment for up to one year and one-half. Violation of the provisions of the Danish VAT legislation being very gross negligent in order to get unauthorized profit to oneself or others can be penalized with imprisonment for up to eight years.


Fines are approximately twice the amount of VAT unpaid without any upper capping limit.

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Tax authorities

Tax audits


How often do tax audits take place?


On the basis of yearly risk analyzes, the Danish tax authorities select which industries, companies and areas will be subject to VAT audits.


Are there audits done electronically in your country (e-audit)? If so, what system is in use?


Yes. ACL is used


Advance rulings and decisions from the tax authority


Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?


It is possible to apply the tax authorities for a binding ruling for a contemplated disposition. Furthermore, it is possible to request an advisory opinion from the tax authorities. However, this informal opinion is not binding for the tax authorities.


Are rulings and decisions issued by the tax authorities publicly available in your country?


Decisions or binding rulings from the tax administration are not publicly available unless they modify existing practice. The tax authorities' website contains the most important decisions and rulings from e.g. the Danish National Assessment Council, Danish National Tax Tribunal and courts.


All binding rulings from the National Assessment Council and decisions from the Danish National Tax Tribunal are available on: http://www.afgoerelsesdatabasen.dk/

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Miscellaneous

In your country, are there unique specific indirect tax rules (regimes) that differ from standard indirect tax rules in other jurisdictions?


According to Danish legislation, it is possible to obtain a group registration with a VAT exempted entity and non-taxable person under certain circumstances.


Are there indirect tax incentives available in your country (e.g. reduced rates, tax holidays)?


No.

 

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