VAT Rates in Denmark
VAT rates in Denmark by Product and Service
There are no reduced VAT rates. Some products are either 0% vat rate or exempt from VAT.
Consequently, unless it is expressly stated that a product or service is exempt or subject to 0% VAT, all goods and services will be taxable at 25%.
The standard VAT rate is 25%. The general or standard VAT rate will be 25%. The standard VAT rate will be applied in general for all goods and services for which no VAT exemption or 0% VAT rate is provided.
The 0% VAT rate will be applied to some goods and services, such as, example, newspapers, and periodicals, in paper or digital format.
Finally, the list of VAT-exempt supplies is longer than in other EU countries. For example, the following supplies of goods or services are exempt: taxis, buses, trains, and scheduled air transport, the services of writers and composers, and services related to cultural activities, including bookshops, zoos, museums, etc.
To confirm the VAT rate applicable to a particular product or service in Denmark, we recommend that you contact us.
VAT Deduction Limits in Denmark
Input VAT is generally deductible as long as the goods or services are used for business purposes.
However, certain expenses are subject to special rules:
- Hotel accommodation: input VAT is 100% deductible provided the invoice is issued to the company and the expense is incurred for business purposes.
- Restaurant meals: input VAT is 25% deductible if the expense is incurred for business purposes.
- Employee meals and entertainment: input VAT is 100% deductible.
- Attendance to conferences, fairs and exhibitions: input VAT is 100% deductible.
- Business gifts: when the value is above DKK 100, input VAT is nondeductible.
- Car expenses: the input VAT paid on the purchase, rental, or lease of a passenger car are nondeductible, as well as the maintenance costs. On the contrary, the expenses incurred for business purposes concerning vans and trucks, are usually 100% deductible. Find here more detail on car expenses deduction.
A valid and fully compliant VAT invoice must be issued for each expense on which VAT is deducted.
You will find here and here useful information about VAT deduction in Denmark. Also, have a look at the legal guidance in VAT deduction in Denmark.
Statute of Limitations in Denmark
The statute of limitations in Denmark is three years.
The statute of limitations period determines the periods on which the tax authority can go back to review the information declared, and apply additional VAT assessments, penalties or interests. In case of severe negligence and under certain conditions, Danish tax authorities can extend this period to ten years.
The statute of limitations also determines the period a taxpayer can voluntarily correct any errors on past submissions, and deduct input VAT.
You can find an overview of the statute of limitations in Europe under the following link.
Tax Point Rules in Denmark
The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.
- General rule: When the supply of goods or services is subject to the mandatory issuance of an invoice, then the tax point is by the time of the supply of the goods or services. If the invoice is issued prior to the supply of goods or services, the tax point arises on the invoice date.
- Prepayments or advanced payments create a tax point because an invoice must be issued for each instalment or prepayment. Special rules apply for vouchers.
- Continuous supplies of services: if the intra-Community acquisition of a service covers a period of more than 1 year, VAT has to be accounted on an annual basis. Tax point is considered to have occurred the last day of the year.
- Intra-Community acquisitions and supplies: Tax point occurs on the invoice date or the 15th day of the month following the month in which the invoice was issued, whichever occurs earlier
- Import: Tax point occurs when the goods are imported according to the relevant import documents.
Tax point rules are regulated in Articles 23 and following of the Danish VAT Act.
Use and enjoyment rules in Denmark
When it comes to establishing the place of supply of a transaction, Member states may deviate from the general rules for B2B and B2C services according to the place where the services have been used and enjoyed. This exception may be introduced to avoid double taxation (positive use and enjoyment rules), to avoid non-taxation (negative use and enjoyment rules), or both.
The effective use and enjoyment rule applies to intangible services listed in Art. 59 of VAT Directive and telecommunications and broadcasting services.
The supply of intangible services to a non-taxable person established or has his residence or habitual residence outside the EU, is not in Denmark unless the services are used and enjoyed in Denmark. This refers to the following list of services:
- Full or partial transfer of copyrights, patent rights, license rights, the right to trademarks, collective marks and designs and other similar rights.
- Advertising services
- Services from consulting companies, engineers, planning companies, lawyers and accountants as well as other similar services, data processing and communication of information.
- Undertaking an obligation to refrain in whole or in part from the exercise of a commercial activity or the use of one of the rights mentioned in this paragraph.
- Banking, financing and insurance activities, except for the rental of safe deposit boxes.
- Supply of labour.
- Leasing of movable property apart from means of transport.
- Access to a natural gas system on the territory of the EU or to any network connected to such a system, to electricity systems or to the heating or cooling network, transmission or distribution through these systems or networks and other services directly connected thereto.
Similarly, the use and enjoyment rule applies to the supply of telecommunications services as well as to radio and television broadcast services from a Danish supplier to a non-EU taxable person (B2B), or to supplies from a Danish supplier to any non-taxable person (B2C).
Check the official Legal Guide for Supplies of intangible services to non-taxablepersons outside the EU as well as Art. 21.d. of the Danish VAT Act.
Bad Debt Relief in Denmark
Bad debt refers to an unpaid invoice for which the supplier has paid the VAT to the tax administration: this is, an invoice has been issued with VAT, reported in the VAT return and the VAT amount has been paid to the tax authorities but the whole price has not been collected from the customer.
This is often due to the client´s bankruptcy, insolvency or simple missed payments to suppliers. In these cases, most countries allow to recover the VAT initially paid to the authorities, however, the conditions change from one country to another.
Bad debt relief refers to the possibility of recovering the VAT from that invoice. Denmark allows for bad debt relief by adjusting the out VAT paid in the periodic VAT return. In order to be able to deduct the bad debt:
- The loss is recognized: the supplier must be able to demonstrate the loss by use of a court order.
- When the debtor is declared in bankrupt procedure or the debtor is dead, this is treated as the equivalent to a court order.
- Otherwise, it is sufficient that the Supplier has made an effort to claim the amount through a debt collection agency, a lawyer or by any other means without success.
