Denmark VAT Guide

Introduction

Denmark has adopted the EU-wide VAT legislation introduced to harmonize the VAT principles of all EU Member States and remove conflicts. Thus, most Denmark VAT rules align with EU VAT Directive 2006/112/EC.

Should you collect VAT in Denmark?

If you are involved in any taxable transaction listed below, you must collect the VAT in Denmark:

1. Supply of Goods: Supply of goods means transferring the right to dispose of a tangible property as owner.
2. Intra-EU acquisition: Acquiring or purchasing goods within Denmark from another EU Member State as a VAT-registered person (typically known as the Reverse Charge Mechanism).
3. Supply of Services: Supply of services covers any transaction not covered in the supply of goods.
4. Import of Goods: Any transaction that imports goods from a non-EU state to an EU Member State.

For more details, please visit the Denmark VAT legislation. Additionally, as the VAT laws of most EU Member States are harmonized with the overall EU VAT law (i.e., Directive 2006/112/EC), you can refer to Articles 14-30 of the EU tax directive for detailed information on taxable transactions.

When should you register for VAT in Denmark?

As a general principle, the VAT is a destination-based tax (owing to place of supply rules – discussed separately in the One Stop Shop article), which means every person (whether registered anywhere or not) must register for VAT when making any taxable sales into Denmark. The following transactions would require a VAT registration in Denmark:

• Supply of Goods or Services in Denmark to non-taxable persons: Seller must register in Denmark and pay VAT only if they have not opted for One Stop Shop (see Notes 1 and 2 below).
• Supply of Services in Denmark to a taxable person: The recipient of services must register and pay VAT in the country if the supplier is not established in Denmark (under Article 196 of the EU VAT Directive (pg.39)).
• B2B Acquisition of Goods: Where the goods are sold by a taxable person from any EU Country to a taxable person in Denmark, the buyer should register for Denmark VAT (reverse charge basis under Article 197 of EU VAT Directive (pg. 39)).
• Import of Goods in Denmark: The importer must pay and register for VAT (if not covered in the Import One Stop Shop–see our OSS article for details).
• Export of Goods/ Services: Exporting goods/ services to non-EU countries would require a VAT number.

Important Note 1: When you supply goods from other EU Member States to Denmark, you must register for Denmark VAT only if your total annual sales (goods/ services) in the EU are more than EUR 10,000; otherwise, they should be taxed in the supplier’s member state. This is based on the EU-wide VAT threshold specified for TBE services and distance sale of goods. For more details, please refer to our EU One Stop Shop Article, which contains information about the EU-wide VAT threshold and distance sale of goods.

Important Note 2: If you have opted for EU One Stop Shop registration, you are no longer required to register separately for Denmark VAT. One Stop Shop applies to the B2C sales made by taxable persons from other EU countries to Denmark of over EUR 10,000 and the import of goods in Denmark below EUR 150. Visit our EU One Stop Shop article for more details.

“Example 1: Company A, a Denmark-based company, sells goods to a non-taxable buyer B in Denmark. Company A’s total annual sales exceed EUR 10,000 in the EU, excluding sales in Denmark.

Company A must either register for Denmark VAT (if it does not opt to register for One Stop Shop) or the One Stop Shop.”

Denmark VAT Threshold Summary

To read the official guidance, refer to Section 48 of the Danish VAT legislation.

How can you Register for VAT in Denmark?

To register for VAT in Denmark, you must submit a VAT registration form through e-mail to virksomhed@erst.dk. The application can be processed in a couple of weeks. The following details must accompany the VAT application:

• Name, address, and nature of business.
• Details of Offices/ facilities including branches, warehouse, etc.
• Bank Account details.
• If a Company is registered elsewhere (or in another EU Member State), the tax office and VAT number under which the Company is registered must be provided.
• Articles of Association.
• Certificate of Incorporation.
• VAT Certificate.
• Power of Attorney when appointing a fiscal representative in Denmark.

Sometimes, the registration process may involve cumbersome formalities, so you can use TaxDo’s streamlined software and not have to go anywhere else. Just fill out the required information on our software, and we will do the rest.

How should you collect and calculate VAT in Denmark?

VAT is generally charged on a destination-based principle (see the place of supply rules described in the OSS Article), which includes all taxable transactions (described earlier in this article) except that otherwise exempt; thus, the VAT Rate is applied to any sales made to Denmark.

VAT Rates

You must charge the VAT Rate of 25%. There are no reduced VAT rates in Denmark.

Read Section 33 of the Danish VAT legislation for tax rate. Alternatively, the VAT rates in Denmark are available here on the EU Commission website.

Certain conditions may apply to the reduced rates, where things get trickier. TaxDo is here for you! Our experts are well-equipped with VAT laws and will resolve all your concerns.

Below is the simple formula you can use to calculate your VAT collection on each merchandise/ service sold:

VAT collectible = Sale value * (Standard Rate as may be applicable)

Digital Products/ Services

Digital Products are those stored, used, or delivered in electronic format or any such form. Denmark VAT must be applied for such digital products since the Danish VAT laws align with EU VAT rules.

The digital products include the following:

• E-books, images, newspapers, movies, periodicals, videos, etc.
• Software-as-a-Service (SaaS), Platform-as-a-Services (PaaS) or Infrastructure-as-a-Service (IaaS).
• Online ads and affiliate marketing.
• Websites, site hosting services, and internet service providers.

VAT Exemptions

The legislation provides certain exemptions from the VAT under Section 34 of the Danish VAT legislation, such as:

• Sale, conversion, repair, maintenance, chartering, etc. of certain ships or aircrafts.
• Delivery of gold to Denmark National Bank.
• Delivery of newspapers that are published with at least one issue monthly.
• Exports.
• Supply of goods to an entrepreneur for his business (B2B).

Please visit the official law (section 34) to see what exemptions are covered.

B2B and Reverse Charge Mechanism in Denmark?

A taxable person from another EU Member State selling the goods/ services to a VAT-registered person in Denmark, the transaction is considered a B2B Intra-Community supply, and the seller is not required to charge the VAT on an invoice raised to the buyer. Instead, the Danish buyer will account for VAT on the intra-community acquisition (under the reverse charge mechanism). In the VAT return, the buyer will calculate the input VAT on purchase from another state and show the output VAT for the same amount, allowing him to adjust the tax liability, resulting in a zero VAT payment. Reverse charge is applied under Articles 196 & 197 of the EU VAT Directive.

The same principle will apply when a taxable person from another EU Member State maintains a warehouse in Denmark and transfers his goods. The seller will need a VAT number in Denmark and should account for VAT as an Intra-Community acquisition under the reverse charge. He will show the deemed purchase (input VAT) and deemed sale (output VAT) when filing the return in Denmark, leading to zero tax being paid.

“Example 2: Company A in France sells goods in Europe. For this purpose, it has set up a warehouse in Denmark. It transfers the goods from France to the Denmark Warehouse and sells them in Denmark.

Company A must register and account for Denmark VAT on the stock transfer (considered an Intra-community B2B acquisition). While filing the VAT return in Denmark, Company A will show the input VAT on the intra-community acquisition and report the output VAT for the same amount. This way, the VAT liability would become zero on the stock transfer. Later, Company A must charge and pay Denmark VAT for goods sold to consumers in Denmark.

Should you appoint a fiscal representative in Denmark?

You must appoint a fiscal representative when you do not have an establishment, registered office, or branch office in the EU and carries out any VAT-exempted or taxable transaction in the country, however it is optional for businesses based in another EU Member State.

The appointed fiscal representative shall require a power of attorney from the taxable person registered in another EU Member State.  

Fiscal representative appointment and carrying out the transaction may be complex, as any defaults can attract heavy fines and penalties. TaxDo can help you by appointing a fiscal representative and handling all the duties, as we work with leading tax partners in Europe, so we can find it easily.

To learn more about the duties and responsibilities of a fiscal representative, read Section 47(2) of the Danish VAT legislation.

How should you file VAT in Denmark?

The VAT declaration frequency in Denmark is as follows:

When you have a new business, you must file the quarterly returns for at least eighteen months. Subsequently, the VAT authority will review your business revenue and update your filing frequency.

For more information, refer to the official website of the Danish VAT authority.

Note: If your tax due date is a holiday or weekend, the next business day would be considered the final due date.

You can file the VAT return in Denmark through the online portal or using TaxDo’s specialized software, which seamlessly files, calculates, and reports your taxes. Additionally, if you are selling to other EU Member States and opted for One-Stop-Shop, you must file an OSS return. Refer to our OSS article for further details.

Are there any fines or penalties for default when filing or paying VAT?

The legislation levies a penalty from DKK 65 up to DKK 800 for late or non-filing VAT returns. Similarly, the penalty for late or non-payment of VAT is also same.

However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. Please review the guidelines Denmark issued for penalties and interest.

VAT Invoice in Denmark

A VAT invoice is a testament to how much VAT is charged and collected and evidence of the B2B/B2C supply basis for applying the other rules. Accordingly, the Denmark VAT invoice must include the following information:

• Business Name and Address of buyer and seller.
• Business VAT number issued to the supplier.
• Date of issue.
• Quantity and type (customary trade name) of the goods supplied or the scope and nature of the other service.
• Time of delivery or other service.
• The applicable VAT rate and the amount of tax are attributable to the consideration.

For more details, refer to Section 52 of Danish VAT legislation.

Important Note 3: For any sales made to a country outside Denmark, you must convert the amounts to your official currency. For this purpose, you can use the European Central Bank’s official exchange Rates.

Keeping Records: You must keep the VAT records for at least ten years under Article 369 of the EU VAT Directive.

Zero VAT territory in Denmark – The likes ofthe Faroe Islands and Greenland do not come under the purview of VAT rules. Thus, any products/ services received from these territories are considered Imports from outside the EU, whereas any sale to these territories is treated as exports, leading to zero VAT. TaxDo will guide you best, as our experts have immense experience and knowledge handling such territories. You may read the other provisions concerning these regions by visiting the Denmark VAT legislation. Below is the structure of VAT rates in these territories: