EU VAT guide – Denmark

VAT rates in Denmark 

How much is VAT in Denmark? 

The Standard VAT Rate (meromsætningsafgift (Moms)) in Denmark is 25%. 

Some supplies are exempt from VAT. This applies to business activities like health care, insurance, and some educational services.

The exact list of taxable transactions and allocated Denmark VAT rate can be found in VAT Denmark regulations. 

VAT thresholds in Denmark 

Valuable information about the VAT threshold in Denmark and applicable provisions can be found in the VAT legislation. Also, a helpful source of information is an interpretation of the appropriate information shared by Tax Authority officials. 

VAT registration threshold for resident businesses: Domestic businesses that have made in the last 12 months turnover below the threshold of DKK 50,000 can remain not-registered for VAT if they choose so. 

VAT registration threshold for non-resident businesses: No registration threshold. Consequently, VAT registration is required as soon as a non-established business begins making supplies subject to VAT in Denmark.

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000.

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold.

VAT Taxable Activities in Denmark

A taxable person by Denmark VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results. 

Types of taxable activities that trigger the imposition of Denmark VAT: 

• The supply of goods and rendering of services in Denmark for consideration;
• Receipt of reverse-charge services by a taxable person in Denmark;
• Export of goods;
• Import of goods.

Other case scenarios exist where domestic or foreign businesses should impose Denmark VAT on their transactions. 

Tax Representative in Denmark 

For non-EU-established businesses, having a tax representative for all VAT compliance-related activities is often mandatory. Tax persons with tax residence in third countries or territories with mutual assistance agreements signed with Denmark can fulfill their tax obligations without the requirement to contract a tax representative. 

For EU-established companies, having a tax intermediary isn’t compulsory. Still, the economic operator could acquire the professional to ease up and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Denmark 

Electronically Supplied Services 

Under the EU VAT Directive 2006/112/EC, Electronically Supplied Services (ESS) are defined as services provided via the Internet or comparable digital networks. One of the most important characteristics of ESS is their clear reliance on automation, which reduces manual human intervention to the bare minimum, if not entirely.

Services that do not primarily rely on digital networks for delivery generally don’t belong in the group of services that are positioned under the umbrella term ESS. In line with the EU VAT Directive and its Implementing Regulation, Denmark has adopted the concept of this type of service into their national legislation. 

This alignment helps ensure a consistent approach to the taxation and regulation of digital services, making the challenges of tax compliance when it comes to digital services or products less burdensome. 

Despite this standardization, the terms “digital services,” “digital products,” and “electronic services” are often used interchangeably, leading to potential confusion and inconsistency in their taxation as well as the legal interpretation. 

Taxability Rules for ESS

The E-commerce reform introduced important changes to the taxability rules across the EU, strengthening uniformity and transparency within the single market. These updates also implemented significant changes regarding mandatory registration in different EU states, tax reporting, and payments of the owed tax. 

Important changes introduced by the 2021 E-commerce Reform:

• B2B Electronically Supplied Services: For transactions involving B2B Electronically Supplied Services where the buyer is a taxable entity, the place of supply is determined based on the general place of supply rules;
• B2C Electronically Supplied Services: Taxable persons established outside the EU should follow standardized EU tax rules. These rules define that the place of supply for ESS is based on the recipient’s place of residence, ensuring that VAT is applied consistently and fairly, regardless of the supplier’s location;

• Distance Sales of Goods and ESS: For EU-based suppliers, reaching an annual turnover threshold of EUR 10,000 is very important. Taxable persons who make turnover below this annual threshold may opt to follow their home country’s VAT rules or report transactions through the One-Stop Shop (OSS) schemes;
• Distance Sales Exceeding the EUR 10,000 Threshold: Merchants established in the EU whose annual turnover exceeds this threshold should apply VAT rates based on the destination principle. 

The comprehensive alignment of VAT regulations. under the umbrella of common rules defined through the EU VAT Directive simplifies compliance procedures for businesses operating within the EU. This policy also supports economic harmony across Member States, fostering a competitive and consistent environment for businesses of all sizes.

How much is VAT in Denmark for Electronically Supplied Services?

VAT rate Denmark: A standard VAT rate of 25% is applied in most cases on sales of Electronically Supplied Services in Denmark.

E-Commerce VAT Rules in Denmark 

On July 1, 2021, EU regulators adopted important revisions to the VAT Directive, specifically to the sections relevant to the E-commerce sector. These changes were designed to reduce the challenges surrounding VAT compliance for businesses involved in cross-border activities.

Relevant Aspects of the 2021 E-Commerce VAT Reforms:

• Cross-Border Sales of Low-Value Goods: The reforms introduced a uniform EU threshold for the import of low-value goods from third countries or third territories. This measure allows businesses to manage VAT obligations more efficiently through a simplified reporting system;

• Intra-Community Distance Sales: The reforms have eliminated the previously established threshold for intra-community distance sales of goods. These thresholds have been defined per national rules, further complicating the compliance for non-resident suppliers;
• Domestic Sales by Deemed Suppliers: Under specific circumstances, the operators of digital platforms will bear the VAT responsibilities. From a practical standpoint, it means that the tax responsibilities of the underlying supplier will shift to the platform operator;
• Provision of B2C ESS: The range of services eligible for reporting under the One-Stop Shop (OSS) schemes has significantly expanded. This broadening greatly simplifies VAT reporting for taxable persons operating cross-border. The existence of these provisions makes things easier when it comes to determining the place of supply rules. 

Improvements for uniform reporting systems:

Besides the introduction of new taxability rules, additional equally important rules have been enacted by the 2021 E-commerce package. With this we mean the introduction of the new OSS schemes, the Import-One-Stop-Shop, and as well the broadening of the reporting scope for the users of the OSS schemes. 

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes

Eligibility for the Non-Union Scheme:

The Non-Union OSS scheme is designed to be used by sellers established outside the EU. This reporting mechanism allows non-EU-based suppliers to efficiently aggregate different types of supplies of services under one common reporting system, streamlining the cross-border reporting duties. 

This approach facilitates ease of VAT reporting for non-EU vendors engaging in the European market.

Eligibility for the Union Scheme:

• EU-based businesses: Taxable entities that are residents in one of the Member States can take advantage of this scheme if they provide B2C services or engage in intra-community distance sales of goods. An important condition that cannot be overlooked is that domestic supplies, i.e., where the customer is a resident of the same MS, cannot be reported under this scheme;
• Non-EU-based taxable persons providing intra-community distance sales of goods: Businesses not based in the EU are also eligible to use the Union Scheme specifically for intra-community distance sales of goods;
• Digital Marketplaces: Whether based in the EU or not, digital marketplaces facilitating intra-community distance sales of goods and for certain domestic supplies can leverage the Union Scheme. 

Eligibility for the Import Scheme:

The Import One Stop Shop (IOSS) scheme is accessible to EU and non-EU-established taxable persons. This scheme applies to various taxpayers, including digital marketplaces under certain conditions, facilitating simplified VAT obligations for import of low-value goods.

OSS Return and Payment 

Denmark’s VAT system doesn’t offer a specially designed simplified registration system for non-resident digital service providers.  Nonetheless, non-resident businesses can utilize the One-Stop Shop (OSS) schemes. By leveraging these schemes, they can avoid being registered according to domestic rules. 

The rollout of the OSS schemes has substantially decreased the level of VAT compliance burden for foreign providers that have customers in Denmark. The standardized EU VAT reporting rules permit many suppliers to operate in full compliance with the tax rules, even without local registration. 

When the circumstances don’t allow non-resident suppliers to adhere to the OSS schemes for their sales to Danish-based customers, they should get familiar with the domestic regulations.

Electronic Platform and Deemed Supplier Rules 

Denmark adopted into its national framework the novelties introduced through the E-commerce VAT package in 2021. Embracing the harmonized EU VAT rules has significantly reduced compliance and administrative costs for non-resident businesses making taxable supplies to customers based in the country.

With the adoption of new provisions, Denmark has incorporated the “deemed supplier” tax concept, which has reshaped the taxability rules within the digital economy. Under the EU VAT Directive, a digital marketplace operator is recognized as a “deemed supplier” in two specific scenarios:

• When goods valued at EUR 150 or less are imported from outside the EU, and when the original suppliers sell directly to EU customers using the intermediary services of the digital marketplace or; 
• When goods in free circulation within the EU are offered by vendors whose residence is outside the EU to customers based in the Member States through the usage of the facilitation service provided by the digital platform.

This approach streamlines VAT responsibilities for digital marketplaces,  bringing Denmark’s VAT practices in line with EU norms. The adoption of the EU-wide rules through domestic legislation shows the commitment of the Denmark regulators to follow the uniform approach when it comes to the applicability of the deemed supplier legal institute. 

Under this regulatory framework, the digital marketplace operator becomes the deemed supplier, practically meaning that VAT compliance liabilities are shifted from the online merchant to the platform. 

This framework outlines two distinct types of transactions:

1. The initial transaction from the vendor to the digital platform is categorized as a business-to-business (B2B) transaction.
2. The subsequent transaction from the platform to the end customer is considered a business-to-consumer (B2C) transaction.

This multi-sided transactional concept defines how the tax responsibility is shifted from the original merchant to the platform operator, only when the pre-requisites exist. 

Invoice Requirements in Denmark 

General invoice information:

• Date of invoice issuance; 
• Date of the supply of goods or provision of services if different from the date of the invoice issuance;
• Unique invoice numbers issued in sequence.

Seller information:

• Company name;
• Full address (head office);
• Billing address if different from company address;
•  VAT number.

Customer information:

• Name;
• Full address;
• VAT number;
• Delivery address;
• The billing address is different from the delivery address.

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price excl. VAT;
• Total without VAT;
• VAT amount in DKK;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – term if applicable;
• Self-billing – term if applicable;
• Tax Representative information for non-resident business.

Foreign Currency Invoice in Denmark  

In Denmark, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in EUR.

VAT Return in Denmark 

Domestic returns

Domestic taxpayers and non-established foreign taxable persons that make taxable supplies or delivery of services under the national VAT Denmark rules, in general, submit declarations:

1. Monthly;
2. Quarterly or;
3. Semi-annually.

Penalties for late reporting and omitted declarations 

Taxpayers should charge Denmark VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame. 

For late submission of the declaration or erroneous declaration, the TA will issue a provisional calculation of the owed tax, which should be paid following the defined deadline. The payment of the provisionary calculated tax doesn’t eliminate the responsibility of providing the correct declaration. 

Alongside this fine, the payment of owed tax calculated on a provisional basis, the non-compliant taxpayers could expect more serious penalties, such as: 

• The employees of the company in question could be blocked from applying for public beneficence systems;
• Taxable persons who haven’t submitted a declaration for four reporting periods can be forcibly deleted from the national commercial register. 

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