Danish VAT rates and VAT compliance

Foreign businesses must charge Danish value added tax (VAT) rates if they are VAT registered in Denmark. Failure to do so will leave the company liable to any under-collected VAT.

The framework for VAT rates in Denmark is set by the European Union (EU), e.g. the minimum VAT rate must be above 15%. There is only a single Denmark VAT rate, with no reduced VAT rates within the Danish VAT system.

For foreign companies VAT registered in Denmark as a non-resident trader, there are a number of rules to follow regarding bookkeeping, and charging and remitting VAT trading. These include:

• Issuing invoices with the disclosure details outlined in the Danish VAT Act
• Correct invoicing of customers for goods or services in accordance with the Danish time of supply VAT rules
• Use of electronic invoices and approvals by customers
• Maintenance of accounts and records, which must be held for at least seven years

Businesses must register for VAT in Denmark if sales of taxable supplies in the country exceed — or are expected to exceed within the next 12 months — DKK 50,000. There is no registration threshold for foreign businesses.

Taxable persons

For VAT purposes, it is the individual that is subject to taxation, rather than the business. Individuals are therefore ‘taxable persons’.

Fiscal representation

Foreign businesses (from outside the EU) must appoint a fiscal representative when operating in Denmark. The fiscal representative is jointly liable for VAT compliance with the business.

In general, input VAT is deductible in Denmark provided the goods or services are used for business purposes.

Employee meals and entertainment, and attendance to conferences, fairs, and exhibitions are 100% deductible. Restaurant meals are 25% deductible if the expense is incurred for business purposes. Hotel accommodation is 100% deductible provided the invoice is issued to the company, and the expense is incurred for business purposes. The input VAT paid on the purchase, rental, or lease of a car is non-deductible. However, expenses incurred for business purposes concerning vans and trucks are deductible.

The tax point (time of supply) rules in Denmark determine when the VAT is due. It is then payable to the tax authorities 10 days after the VAT reporting period end (monthly or quarterly).