Understanding Denmark VAT Rates and Compliance in 2023
Denmark is a thriving economy with a strong ecommerce and digital services market. If you’re a business owner looking to expand your operations in Denmark, it's crucial you familiarize yourself with the Danish VAT system, including VAT rates. In this guide, we look at all aspects of Danish VAT compliance from VAT rates, to registration, to invoicing, and more.
Key takeaways
- Denmark has a standard VAT rate of 25% which applies to most goods and services. Understanding and adhering to this rate is crucial for businesses operating in Denmark.
- Denmark also has a 0% VAT rate, promoting access to information and public transportation, as well as exemptions designed to support specific industries.
- Adhering to VAT registration thresholds, compliance requirements, and invoicing rules is vital for businesses operating in Denmark. Non-compliance can result in penalties, interest charges, and even criminal prosecution.
Overview of Danish VAT rates
In Denmark, VAT is regulated by the Danish VAT Act, known as Mervrdiafgiftsloven (Momsloven), and is administered by the Danish Tax Authority, Skattestyrelsen (SKAT). VAT-registered sellers of goods and services must apply the applicable VAT rates as set out in the Danish VAT legislation and collect the tax, which is then remitted to the Danish tax authorities. Failure to charge Danish VAT rates for foreign businesses registered for VAT in Denmark can result in the company being liable for any VAT that has not been collected.
Standard VAT rate
The standard VAT rate in Denmark is 25%, one of the highest in the EU, and applies to most goods and services in the country.
Adherence to this standard rate is mandatory for businesses selling goods and services in Denmark to maintain VAT compliance.
Reduced VAT rates and exemptions
Some items, like newspapers, magazines, books, and public transportation services, are subject to a 0% VAT rate. This means that no VAT is added to the price, effectively making these items tax-free. This policy aims to promote access to information and public transportation.
In addition to reduced VAT rates, some goods and services are exempt from VAT under the Danish VAT Act. These exemptions are designed to relieve specific industries or activities from the burden of VAT, promoting economic growth and social welfare. Businesses need to familiarize themselves with these reduced rates and exemptions to correctly calculate and report their VAT obligations.
VAT registration and compliance in Denmark
VAT registration and compliance are vital aspects of conducting business in Denmark, and specific thresholds and requirements apply depending on the status and circumstances of a business.
When to register for VAT
Businesses must register for VAT in Denmark if their taxable turnover exceeds DKK 50,000 over a 12-month period. This threshold also applies to foreign businesses registered for VAT in Denmark, making it crucial for these companies to closely monitor their taxable turnover to ensure compliance.
Additionally, businesses engaged in distance selling with Denmark must register for VAT if they meet the threshold of €10,000.
How to register for VAT
To register for VAT in Denmark, businesses must submit all requested documents electronically to the tax office. These documents include, but are not limited to:
- The business’s name
- Address
- VAT registration number
- Description of the goods or services provided
Additional documents may be required, depending on the specific circumstances of the business.
For foreign companies registering for VAT in Denmark, it's recommended they use a fiscal representative or tax advisor to help navigate the registration process and ensure compliance with Danish VAT regulations. This can be particularly helpful for businesses not familiar with the Danish tax system and VAT requirements.
Fiscal representation
Non-EU-based businesses are obligated to have a fiscal representative in Denmark. Engaging a fiscal representative in the country is beneficial when conducting activities subject to VAT obligations given their knowledge and understanding of the Danish VAT system.
Invoicing and reporting requirements
Invoicing and reporting are crucial aspects of VAT compliance in Denmark, and businesses must ensure that all invoices issued are compliant with Danish VAT regulations.
Invoicing rules
VAT sales in Denmark require the inclusion of certain information on all invoices issued. This includes:
- The seller’s name, address, and VAT registration number
- The buyer’s name and address
- The date of the invoice
- The invoice number
- A description of the goods or services sold
- The quantity and unit price of the goods or services sold
- The total amount of the invoice
- The applicable VAT rate
Businesses must ensure their invoices comply with these rules to avoid potential penalties and to maintain accurate records of their VAT transactions.
Record keeping
Businesses in Denmark are required to keep records of their VAT transactions for a minimum period of 10 years from the end of the year in which the service was provided. Maintaining accurate records is necessary for businesses to comply with Danish VAT regulations and to facilitate future audits or inspections.
VAT return filing and deadlines
The deadlines for filing VAT returns in Denmark depend on the size and turnover of the business, with filing required on a monthly, quarterly, or half-yearly basis. For example, businesses with an annual turnover of between DKK 5,000,000 and DDK 50,000,000 must submit quarterly VAT returns with a deadline of the first day of the third month after the end of the reporting period, also known as the requested quarterly settlement.
In contrast, businesses with an annual taxable revenue exceeding DKK 50,000,000 must submit monthly VAT returns, with the due date being the 25th of the month following the end of the reporting period.
Penalties for non-compliance
Failing to comply with Danish VAT regulations can have serious consequences for businesses, and penalties for non-compliance with Danish VAT regulations can range from fines to criminal prosecution.
In Denmark, the interest rate for late payment is 0.7% per month on the amount outstanding, with an administration fee of DKK 65 for every reminder received. The penalty for failing to file a tax return is DKK 800 per declaration.
In extreme cases, failure to adhere to Danish VAT regulations may result in criminal prosecution and incarceration.
Businesses should be aware of these potential consequences and adopt all necessary measures to comply with Danish VAT rules.
Navigating intra-community VAT transactions
Intra-community VAT transactions between Denmark and other EU member states can be complex and require a thorough understanding of the applicable rules and regulations, including those related to tax administration.
Reverse charge mechanism
The reverse charge mechanism is a VAT accounting method that shifts the responsibility for reporting and paying VAT from the supplier to the customer. This mechanism is applicable to specific transactions between Danish and EU businesses, including cross-border services or goods subject to import VAT.
The reverse charge mechanism simplifies VAT reporting and payment for businesses engaged in intra-community trade, helping them to remain compliant with Danish VAT regulations.
Intrastat declarations
Intrastat declarations are required for businesses with an annual turnover exceeding DKK 13,000,000 for Arrivals and DKK 10,000,000 for Dispatches.
Deadlines for submitting Intrastat declarations in Denmark vary between Group 1 and Group 2 businesses, with different due dates for each group.
Businesses may also be required to submit EC Sales Lists for the sale of goods and services to other EU Member States.
Conclusion
By familiarizing yourself with Danish VAT rates, registration thresholds, and invoicing and reporting requirements, you can ensure your business remains compliant and avoid costly penalties. By equipping yourself with the necessary VAT knowledge and tools, you'll be able to confidently conduct business in Denmark and maintain a successful, compliant operation.
Do you need help with your VAT compliance? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.
Frequently Asked Questions
What is the VAT rate in Denmark in 2023?
The standard VAT rate in Denmark in 2023 is 25%.
Does Denmark charge VAT to the UK?
No, Denmark does not charge VAT to the UK, as sales of goods outside the EU are exempt from VAT regardless of the buyer.
Who has the highest VAT in Europe?
Hungary has the highest standard VAT rate in Europe, at 27%.
Sweden and Denmark follow close behind with a rate of 25%.
When do businesses need to register for VAT in Denmark?
Businesses are required to register for VAT in Denmark when their taxable turnover reaches DKK 50,000 over 12 months or if they reach a distance selling threshold of €10,000.
