VAT, GST and Sales Tax in Denmark

Summary

Name of the tax Value-added tax (VAT)
Local name Merværdiafgiftsloven (Momsloven)
Date introduced 3-Jul-67
Trading bloc membership European Union (EU) Member State
Administered by Central Customs and Tax Administration (www.skat.dk)
VAT rates
Standard 25%
Other Zero-rated and exempt
VAT number format DK 12 34 56 78
VAT return periods Monthly: Annual turnover more than DKK50 million, Quarterly: Annual turnover between DKK5 million and DKK50 million, Half-yearly: Annual turnover below DKK5 million
Thresholds Registration
Businesses established in Denmark DKK50,000 a year
Businesses established elsewhere None
Distance selling DKK280,000
Intra-Community acquisitions DKK80,000 a year (for businesses exempted from VAT)
Recovery of VAT by non-established businesses Yes

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in Denmark by a taxable person
  • The intra-Community acquisition of goods from another EU Member State by a taxable person (see the chapter on the EU)
  • Reverse-charge services received by a taxable person in Denmark
  • The importation of goods from outside the EU, regardless of the status of the importer

Who is liable

The term “taxable person” means any entity or individual that makes taxable supplies of goods or services, intra-Community acquisitions or distance sales, in the course of a business.

The VAT-registration threshold is turnover of DKK50,000 a year for a business resident in Denmark. No registration threshold applies for a non-established business. Consequently, VAT regis­tration is required as soon as a non-established business begins making supplies subject to VAT in Denmark.

Group registration. Groups of companies or related entities may request registration as a single taxable person (VAT group). If both VAT-registered and VAT-exempt companies are part of a VAT group registration, the parent company must be included in the VAT group. All group members must be 100% owned by the parent company and established in Denmark.

The effect of VAT grouping is that no VAT is charged on supplies between group members. However, if any member of the group has exempt activities, the group must deduct input VAT on a pro rata basis. The group members are jointly and severally liable for any VAT on transactions with third parties.

Non-established businesses. A non-established business must register for Danish VAT if it makes any of the following supplies:

  • Goods that are located in Denmark at the time of supply
  • Intra-Community acquisitions in Denmark
  • Distance sales in excess of the annual threshold
  • B2C e-services, broadcasting and telecommunications to indi­viduals with Danish residence
  • Services that are not subject to the tax under the “reverse-charge” mechanism (for example, services related to real estate that are supplied to private persons). Most services supplied to taxable persons in Denmark are covered by the Danish reverse-charge regime.

Tax representatives. Businesses established in the following coun­tries are not required to appoint a tax representative to register for Danish VAT: Aland Islands, Faroe Islands, Iceland, EU Member States, Greenland, Norway

However, businesses established in the above countries may choose to appoint a tax representative to register for VAT. If a business established in a country, which is not an EU Member State, imports goods into Denmark, there will be an obligation to appoint a fiscal representative who is jointly and severally liable for any VAT or customs duty payments due.

VAT registration for non-established taxable persons from the Aland Islands, EU Member States, the Faroe Islands, Greenland, Iceland and Norway may be conducted through the following office:

Skattecenter Toender Pionér Allé 1

DK-6270 Toender Denmark

Businesses established in other countries must appoint a Danish resident as tax representative to register for VAT. The representa­tive and the nonresident business are jointly and severally liable for VAT liabilities.

The Danish tax authorities may require a non-established taxable person to provide security equal to its expected VAT liability for a three-month period. This may occur if the tax authorities believe a risk exists that the non-established business may not pay its indirect tax obligations.

Registration procedures. Foreign businesses have to register for VAT by filling out the following form: http://tinyurl.com/gwcbbfm.

The application can be submitted either electronically or in hard copy, but it must be submitted at the latest eight days before tax­able activities are started in Denmark. If the application is not submitted or submitted late, or the information provided is not correct or insufficient, a fine might be issued.

Additional documentation can be required, for instance to show whether or not the company has a debt and documentation of the company’s registration in its home country.

The registration process takes about two weeks. A certificate with the Danish VAT number will be sent to the registered postal address.

Reverse charge. If a non-established business supplies services to a taxable person in Denmark but does not register for VAT, the taxable person may be required to account for the VAT due under reverse-charge accounting. This means that the taxable person charges itself VAT. The self-assessed VAT may be deducted as input tax.

In case of digital services, telecom services or broadcasting ser­vices supplied in a B2B context, the place of supply is the place where the recipient is established. No Danish VAT should be charged, and reverse charge applies unless supplier and customer are established in Denmark.

In case of digital services, telecom services or broadcasting ser­vices supplied in a B2C context, until the end of 2014 only Danish businesses and foreign businesses that are not established in the EU were liable to charge Danish VAT to the recipients that are established in Denmark. Effective 1 January 2015, Danish VAT is always due in case of supply to customers established in Denmark, disregarding whether the supplier is established inside or outside the EU. We refer to the section on MOSS below for more information.

From 1 January 2016, the Danish authorities increased controls regarding distance sales of goods and e-services supplied to non­taxable persons. The authorities can require banks, credit card companies and others handling transfer of payments to inform them of payments involving distance sales of goods made to Danish customers and electronic services supplied to nontaxable persons in Denmark.

Late-registration penalties. No specific penalty is levied for late VAT registration. However, a penalty may be charged of up to twice the VAT amount due in the period during which the busi­ness should have been registered.

Mini One-Stop Shop (MOSS). Suppliers of B2C e-services, broad­casting and telecommunications in the EU can register for the VAT MOSS scheme from October 2014 and will be able to use the MOSS service from January 2015.

Check the site of the Customs and Tax Administration at www. skat.dk for a registration form. After MOSS registration, the VAT must be settled and paid quarterly in DKK.

Deregistration. A taxable person that ceases to be eligible for VAT registration must deregister within eight days. It is possible to receive the same VAT number if taxable activities are resumed.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are liable to a rate of VAT, including the zero rate.

In Denmark, the following are the two rates of VAT:

  • Standard rate of 25%
  • Zero rate (0%)

The standard rate of VAT applies to all supplies of goods or ser­vices, unless specific measures provides for the zero rate or an exemption.

Examples of goods and services taxable at 0%

  • Newspapers
  • Supplies to ships
  • Supplies of gold to the Danish National Bank

The term “exempt supplies” refers to supplies of goods and ser­vices that are not liable to tax and that do not give rise to a right of input tax deduction (see Section F). Some supplies are classi­fied as “exempt with credit,” which means that no VAT is charge­able, but the supplier may recover related input tax. Exempt-with-credit supplies include exports of goods and related services, intra-Community supplies of goods and intangible ser­vices supplied to either another taxable person established in the EU or a recipient outside the EU (see the chapter on the EU).

Examples of exempt supplies of goods and services

  • Medical services
  • Education
  • Financial services
  • Insurance and re-insurance
  • Supplies made by writers, composers and performing artists
  • Cultural services
  • Transport of passengers
  • Investment gold
  • Leasing of real estate

Option to tax for exempt supplies. It is possible to make a volun­tary registration for letting, tenancy and sale of real estate. The voluntary registration for letting of property must be at least two years. The two-year period starts when the first letting has com­menced.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” The basic time of supply for goods is when they are delivered. The basic time of supply for services is when they are performed.

In Denmark, VAT is due when the invoice is issued, which is normally at the time of supply. In practice, however, the Danish tax authorities accept invoices that are issued after the time of supply if that is the taxable person’s normal business practice.

Prepayments. The time of supply for an advance payment is when the supplier receives the payment even if the supply has not yet been made. A final time of supply occurs when the supply has been completed.

Intra-Community acquisitions. The time of supply for an intra­Community acquisition of goods is the 15th day of the month following the month in which the acquisition occurred. If the supplier issues an invoice before this date, the time of supply is when the invoice is issued.

Imported goods. The time of supply for imported goods is the date of the customs clearance or the date on which the goods leave a duty suspension regime.

Reverse charge. Certain services imported from outside Denmark by a taxable person are subject to the tax under the “reverse-charge” mechanism, which means that the recipient of the service must account for VAT. The time of supply for a reverse-charge service is the VAT period in which the service is supplied or the period in which the invoice is issued if the invoice is issued shortly after the supply.

Cash accounting. Denmark does not operate a cash accounting scheme.

Continuous supplies of services. The time of supply of services where no final delivery has taken place is at the end of each VAT return period.

Continuous supplies of goods. When, as part of a continuous sup­ply of goods, the delivery is taking more than one month and has not concluded, delivery is considered to have taken place on the last day of the month. If delivery is taking more than one year and has not concluded, and no payment has been made, delivery is considered to have taken place on the last day of the calendar year.

Leased assets. Not applicable.

Recovery of VAT by taxable persons

A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. Taxable persons generally recover input tax by deducting it from output tax, which is VAT charged on supplies made.

Input tax includes VAT charged on goods and services supplied in Denmark, VAT paid on imports of goods and VAT self-assessed on intra-Community acquisitions of goods and reverse-charge services.

A valid tax invoice or customs document must generally accom­pany a claim for input tax.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for some items of business expenditure.

The following lists provide some examples of items of expendi­ture for which input tax is not deductible, and examples of items for which input tax is deductible if the expenditure is related to a taxable business use.

Examples of items for which input tax is nondeductible

  • Business gifts with a value of more than DKK100
  • Purchase, lease or hire of a private car
  • Maintenance costs for a private car
  • Employee meals and entertainment

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • 100% of hotel accommodation, if strictly for business purposes
  • 25% of restaurant services, if strictly for business purposes
  • Books
  • Long-term lease of cars used for a business (a proportion)
  • Attendance at conferences, seminars and exhibitions
  • 50% of home telephone bill

Partial exemption. Input tax directly related to making exempt supplies is not generally recoverable. If a Danish taxable person makes both exempt and taxable supplies, it may not recover input tax in full. This situation is referred to as “partial exemption.” Exempt with credit supplies are treated as taxable supplies for these purposes.

The amount of input tax that may be recovered is calculated in the following two stages:

  • The first stage is the direct allocation of VAT to exempt and taxable supplies. Input tax directly allocable to exempt supplies is not deductible.
  • The second stage is to prorate the remaining input tax that relates to both taxable and exempt supplies (for example, VAT incurred on business overhead) based on the percentage of total turnover that is taxable. The pro rata calculation must be per­formed each year, and the recovery percentage is rounded up to the next whole number. For example, a recovery percentage of 77.2% is rounded up to 78%.

Capital goods. Capital goods are items of capital expenditure that are used in a business over several years. Input tax is deducted in the VAT year in which the goods are acquired. The amount of input tax recovered depends on the taxable person’s partial exemption recovery position in the VAT year of acquisition. How­ever, the amount of input tax recovered for capital goods must be adjusted over time if the taxable person’s partial exemption recovery percentage changes during the adjustment period.

In Denmark, the capital goods adjustment applies to the follow­ing assets for the number of years indicated:

  • Land and buildings including additions and alterations: adjust­ed for a period of 10 years
  • Repair, maintenance and renovation of land and buildings if the annual cost exceeds DKK100,000: adjusted for a period of five years
  • Items of machinery, equipment and furniture costing more than DKK100,000: adjusted for a period of five years
  • Services that are comparable to physical capital goods, includ­ing software and rights, where such services have a purchase price exceeding DKK100,000

The adjustment is applied each year following the year of acqui­sition to a fraction of the total input tax (1/10 for land and build­ings and 1/5 for other capital goods). The adjustment may result in either an increase or a decrease of deductible input VAT, depend­ing on whether the ratio of taxable supplies made by the business increases or decreases compared with the year in which the capi­tal goods were acquired.

Refunds. If the amount of input VAT recoverable in a period exceeds the amount of output VAT payable, a refund may be claimed by submitting the VAT return form.

Preregistration costs. Preregistration costs are refundable as long as they relate to the business’s taxable activities.

Write-off of bad debts. To claim bad debt relief, the supplier must be able to demonstrate the loss by use of a court order. If a debtor is bankrupt, in liquidation, etc., or the debtor is dead, this is treated as the equivalent to a court order.

In regard to bad debt not related to bankruptcy and the like, it is sufficient that the supplier has made an effort to claim the amount through a debt collection agency or a lawyer or that the supplier himself has tried in vain to collect the amount. The debt must be considered lost and minimum internal chasing procedure must be performed in order to render it probable that the debt cannot be recovered. The chasing procedure must be reasonable compared to the size of the debt and the costs related to the col­lection.

Noneconomic activities. Costs related to noneconomic activities are not deductible. For overhead cost related to both economic and noneconomic activities, an evaluation must be made as to what extent the goods or services are related to the taxable activities.

Recovery of VAT by non-established businesses

The Danish tax authorities refund VAT incurred by businesses that are neither established nor registered for VAT in Denmark. A non-established business may claim Danish VAT to the same extent as a VAT-registered business and to the extent the VAT incurred is deductible in the country of establishment. The refund procedure depends on whether the business seeking the VAT refund is established in the EU or in a third country. Refunds to businesses established in the EU are made under the rules in Directive 2008/9/EC. Refunds to businesses established outside the EU are made under the rules in Directive 86/560/EEC (13th VAT Directive). In practice, Denmark does not exclude busi­nesses from any non-EU countries from the recovery scheme.

For the general rules of the EU VAT refund schemes, see the chapter on the EU.

Refund application. The deadline for refund claims for both EU and non-EU businesses is 30 September of the year following the year in which the tax is incurred.

Claims must be submitted in Danish, English, German or Swedish. The application for a refund must be accompanied by the appro­priate documentation (see the chapter on the EU).

The minimum claim period is three months, while the maximum period is one year. The minimum claim for a period of less than a year is DKK3,000. For an annual claim, the minimum amount is DKK400. These limits apply to both EU and non-EU businesses.

Applications for refunds of Danish VAT may, for businesses established outside the EU, be sent to the following office:

Skattecenter Toender 8/13 moms

Pionér Allé 1

DK-6270 Toender Denmark

Businesses established in another EU Member State must apply for a VAT refund by following an electronic procedure (see the chapter on the EU).

Repayment interest. If the acceptance of the refund request and the payment of the refund (or the denial of the refund request) do not occur within six months, the Danish tax authorities pay inter­est to claimants for refunds under the general Danish rules.

Invoicing

VAT invoices and credit notes. A Danish taxable person must generally provide a VAT invoice for all taxable supplies made, including exports and intra-Community supplies.

A VAT invoice is necessary to support a claim for input tax deduction or a refund under the VAT refund schemes (see the chapter on the EU).

A VAT credit note may be used to reduce the VAT charged and reclaimed on a supply. It must be cross-referenced to the original VAT invoice and contain the same information.

Electronic invoicing. Effective 1 January 2013, the VAT law has been amended to permit electronic invoicing in line with EU Directive 2010/45/EU.

Proof of exports and intra-Community supplies. VAT is not charge­able on supplies of exported goods or on intra-Community sup­plies of goods (see the chapter on the EU). However, to qualify as VAT-free, exports and intra-Community supplies must be sup­ported by evidence that proves the goods have left Denmark. Acceptable proof includes the following documentation:

  • For an export, the seller must retain the signed customs docu­mentation with a pro forma invoice and commercial evidence such as customer orders and contracts.
  • For an intra-Community supply, the seller must indicate the customer’s VAT identification number (from a different EU country) and must retain commercial documentation, such as purchase orders, transport documentation, and evidence of both payment and receipt of goods.

Foreign-currency invoices. A Danish VAT invoice may be issued in Danish kroner (DKK) or euros. If another currency is used, the amount of VAT must be converted into Danish kroner, either by using the current exchange rate or the official monthly customs exchange rate published by the Danish tax authorities.

B2C invoices. Effective 1 January 2015, new rules apply to the place of supply for supplies of telecommunications, broadcasting and electronic services to non-VAT taxable customers. Please refer to the European Union chapter. Foreign businesses regis­tered under the Mini One-Stop Shop scheme are exempt from the invoicing requirement when selling these services to Danish consumers.

 

VAT returns and payment

VAT returns. A Danish taxable person whose turnover exceeds DKK50 million must submit VAT returns on a monthly basis. A taxable person with a turnover of between DKK5 million and DKK50 million generally submits returns on a quarterly basis (monthly returns are optional). A taxable person with turnover of less than DKK5 million must submit returns on a half-yearly basis.

Monthly VAT returns and payments are due by the 25th day of the month following the return period. Quarterly VAT returns and payments are due by the first day of the third month following the end of the return period. Half-yearly VAT returns and payments are due by the first day of the third month following the end of the return period.

A summer VAT relief scheme allows filing and payment for the June period to be made by 17 August.

Returns must be completed and liabilities must be paid in Danish kroner.

Mini One-Stop Shop (MOSS). Suppliers of B2C e-services, broad­casting and telecommunications in the EU can register for the VAT MOSS scheme.

Electronic filing and archiving. It is generally compulsory for local businesses and foreign businesses to submit VAT returns online, using the Danish tax authorities’ website, www.skat.dk through Tast Selv.

VAT records must be kept for five years, and if the records con­cern immovable property covered by the capital goods scheme, they must be kept for 10 years. VAT records may be kept elec­tronically or on microfilm, and the company must provide the tax authorities a description of the method of storage in order to make it possible to locate the relevant records and print them out.

Access to stored records on a server outside Denmark depends on the location of the server and an approval from the Danish authorities.

Annual returns. Not applicable.

Penalties

The penalty for the late submission of a VAT return is DKK65 per reminder for payment. In addition, interest is levied for late payment of VAT. The current interest rate is 0.8% per month, calculated on a daily basis. This interest is not deductible for income tax purposes.

EU filings

Intrastat. Danish taxable persons that trade with other EU coun­tries must complete statistical reports, known as Intrastat, if the value of their sales or purchases exceeds certain thresholds. Separate reports cover intra-Community acquisitions (Intrastat Arrivals) and intra-Community supplies (Intrastat Dispatches).

The 2016 threshold for arrivals is DKK6 million, and for dis­patches it is DKK4.7 million.

Danish taxable persons must complete Intrastat declarations in Danish kroner. Euros may not be used.

The Intrastat return period is monthly. The submission deadline is the 10th working day of the month following the end of the Intrastat return period.

If a report is late or missing, a fine of DKK550 is imposed.

EU Sales Lists. If a Danish taxable person makes intra-Commu­nity supplies or renders services that are subject to reverse charge in another EU country in any return period, it must submit an EU Sales List (ESL). An ESL does not need to be submitted for a period in which no intra-Community supplies are made.

ESLs must be submitted on a monthly basis. In some cases, busi­nesses that have limited intra-Community supplies may obtain permission to submit ESLs on a quarterly basis.

ESLs must be completed in Danish kroner.

If an ESL is late, a reminder penalty of DKK65 is imposed.