Danish companies as well as certain foreign companies, are subject to a Danish corporate tax rate of 22% (2023) on their net corporate income. Business expenses incurred by acquiring, securing and maintaining taxable income are generally deductible
However, there are other tax duties you should be aware of, if you are starting your own business or is a new company in Denmark.
In this article, we would like to present you with an overview of the tax duties as a new company in Denmark.
What you should know
- You will be automatically registered for corporate tax with the Danish Tax authority, when you register your company. The corporate tax level is currently 22 %.
- As a general rule, you must register for VAT when you sell goods or services in Denmark, and you are responsible for VAT-registration of your company. VAT in Denmark is at a staggering 25 %.
- As a general rule, if you are exempt of VAT, you should register for payroll tax.
- If you have employees, you should be registered as employer within 8 days, and pay taxes and labour market contributions.
- You might have to register as an importer/exporter in certain cases.
- You should be aware of accounting and bookkeeping regulations in Denmark – you must keep all book-keeping documentation for at least 5 years.
You are responsible for the VAT registration.
First, you must register your business with the Danish Business Authority, DBA (Erhvervsstyrelsen), before starting work in Denmark. The company will automatically be registered for corporate tax with the Danish tax authorities (SKAT) based on the information you provide to the DBA. However, you are responsible for the VAT registration.
When you have registered your business, you can find your business registration certificate by logging on to E-tax for businesses (TastSelv Erhverv). Any changes in your business (change of name, address, industry, business form, hiring of employees, etc.) should be registered via indberet.virk.dk.
As a registered company in Denmark you will be required to have a “NemKonto” (Easy-Account). A NemKonto is a normal bank account that you assign to receive payments from the public sector, e.g. tax- or VAT refunds.
When do I need to register for VAT?
As a general rule, you must register for VAT within 8 days when you sell goods and services in Denmark. VAT is a 25 % tax which must be added to the price of the goods and services that you sell, unless you are expressly exempted. If registration for VAT is required, you should charge, declare and pay VAT from the date you register for VAT.
You must register for VAT when you sell goods and services for more than DKK 50,000.
Depending on the size of your company’s turnover, you will be told to pay VAT either monthly, quarterly or every half year. If your sales are less than DKK 50,000 annually, registering for VAT is optional.
Once you have registered for VAT, you must prepare VAT accounts, and you can deduct VAT on most goods and services purchased for your business that were purchased for resale or for use in the operation of your business.
It will be possible to register your business for VAT at indberet.virk.dk (in Danish).
What obligations are there for VAT exempted business?
In principle, if your business is exempt from VAT, you should register for payroll tax (lønsumsafgift) instead of VAT. Here you can find a list of VAT-exempt business.
What are my tax duties as employer in Denmark?
If you register as an employer at the same time as registering your business, the deadline is eight days before the launch of your business. If you employ staff after the company is up and running, the deadline is eight days after you pay salary for the first time. You can register as employer at www.virk.dk.
As an employer you should provide specific salary information every month, and pay certain withholding taxes (A-tax) and labour market contributions to the Danish Tax Authorities (Skat) through E-income in E-tax for businesses (TastSelv/Erhverv).
In order to calculate the employee’s salary, you will need to order a tax card, by entering the employee’s civil registration number (CPR). The payslip should include the employer’s name, address and business registration number (CVR) as well as the employee’s name, address and CPR, and salary period, income year and number of salary hours.
Every month you should enter information about A-income, salary hours, A-tax, labour market contribution (AM-bidrag), ATP etc. in the E-income and Letløn systems. Also, you should keep your accounting records on paper or electronically for at least 5 years.
We would recommend using a pay-roll provider to handle all the above calculations, withholding of taxes, as well as registrations. That makes your business’ life a lot less complicated, and pay-roll providers in Denmark are reasonably priced. We can recommend one for you. Let us know.
If you are self-employed
The deadline for registering as an employer is eight days before your business begins operating.
If you run your business as a sole-proprietorship, you are responsible for paying tax and labour market contributions (AM-bidrag). You do so by changing your preliminary income assessment (forskudsopgørelse). Your taxable income is called B-income and therefore you must pay B-tax (tax deducted from income not taxed at source). You pay tax on your business profit by entering the amount you expect to earn (business profit) in your preliminary income assessment in E-tax for individuals (TastSelv Borger).
Trade outside EU/EEA?
If your business imports or exports goods to and from other countries outside the EU
/EEA, you need to register as an importer/ exporter. Besides, if you do business with customers abroad, special VAT rules apply. You can read more about imports and exports in Denmark in our article “Import and export in Denmark“.
Also, if your business imports, manufactures or sells goods subject to excise duties – typically spirits, chocolate and games – you need to register for excise duties.
Accounts and bookkeeping
In Denmark, you are required by law to keep all your business receipts for five years after the end of the income year. You should keep balanced cash accounts of the business income and expenses, i.e. if there are daily purchases or sales, you should enter a daily record of these.
In Denmark, you are required by law to keep all your business receipts for five years after the end of the income year.
You will find your extended tax return and service letter in E-tax for individuals (TastSelv Borger). If you are registered for VAT or payroll tax, your tax return must be filed via E-tax. You need to prepare accounts to complete and file your tax return by 1 July at the latest after the year end. Tax accounts need to be prepared for each year you run your business, regardless of the size of business.
If the business revenue exceeds DKK 300,000, you must report accounting information to SKAT. If the business revenue is less than DKK 300,000, it is sufficient to complete and file your extended tax return. You only need to send your tax accounts to SKAT if your revenue exceeds MDKK 25.
Tax is a complex and ever-changing subject. This article provided a simple overview. You cannot rely on this article as legal advice.
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