Annual company settlement Denmark

Are you a business owner in Denmark? You have come to the right place! On this page, you will find essential information about the settlement of your business. You will find out how to settle individual types of business, which documents to prepare, which deadlines to meet, and finally, which tax reliefs you can take advantage of. Entrepreneurs who have decided to conduct their own business in Denmark have a full tax obligation, i.e. they must file an annual tax return with the Danish tax authorities, given all income, both from Denmark and from abroad (given agreement on the avoidance of double taxation). The settlement is most often done electronically, via www.skat.dk. Please note, however, that you will need to order earlier NemID or Tastselv code and CPR (Personnummer) issued by Customs and Taxation. If you wish to check your tax return, click on Se årsopgørelsen on your individual SKAT account page. If you want to make corrections and include tax allowances, click on Ret årsopgørelsen/oplysningsskemaet. In addition to unlimited tax liability, as a self-employed person in Denmark you are also entitled to a personal tax allowance - Personfradrag, the amount of which is determined individually each year.

You may also benefit from other tax reliefs, such as:

• relief for renting a flat in Denmark (evidenced by a rental agreement);
• relief from utility charges in rented accommodation (evidenced by receipts or bank transfer receipts);
• allowance for travel expenses (evidenced by e.g. tickets).

It is worth remembering that pension and insurance contributions, child support, as well as commuting and food costs can be deducted from tax. However, the SKAT can check within seven years whether the declared expenses are reflected in reality. As a result, business owners in Denmark have to store documentation for this period to prove the veracity of the tax returns they have filed. Owners must register their Danish business as a VAT payer up to eight days before the start of operations. The obligation to register also applies to all businesses with an annual turnover of more than DKK 50,000. Registration can be done electronically - via the RUT website, the Register of Foreign Service Providers (virk.dk).

25 per cent VAT is payable by all companies selling services or goods in Denmark. The standard rate of Danish VAT is 25 per cent. It is worth noting that companies must also account for this tax in their annual tax return.

Danish companies may use the reverse-charge procedure. The reverse-charge procedure means that the purchaser of the service transfers the settlement of VAT to itself, thereby relieving the seller of this obligation. In practice, this means that foreign companies that wish to sell goods and services to Danish companies do not have to charge Danish VAT. It is then not necessary to include the tax on the invoice. You only need to enter the net value of the goods or services and then use a ready-made formula, e.g. Reversed charge (meaning that it is the buyer who should charge and pay the VAT) and enter the buyer's registration number (CVR or SE-number). Every owner of a Danish company is required to submit an annual tax return to Danish Customs and Taxation Office. If he or she employs employees, he or she must also ensure that they receive all the documents necessary for the annual tax return.

• AM-bidrag - contribution to the Labour Fund (8%),
• Befordringsfradrag - relief for transport to the workplace,
• Beregnet skat - accrued tax,
• Beskæftigelsesfradrag - relief for labour,
• Bundskat - bottom tax (8%),
• Eget pensionsbidrag - own share of pension contribution (5%),
• Ejendomsværdiskat - property tax,
• Fradrag - deductible tax credit,
• Kapitalindkomst - capital income (interest income after deduction of interest expenses),
• Kommuneskat - municipality (municipal) tax,
• Ligningsmæssige fradrag - relief from municipal tax and health tax,
• Lønindkomst - income from work (including company car/phone),
• Personalegoder - employee allowances,
• Personfradrag bundskat - bottom tax-free amount,
• Personfradrag kommuneskat - municipal tax-free amount,
• Personlig indkomst - personal income from work (takes into consideration allowances such as benefits and contributions),
• Renteindtægter - interest income,
• Renteudgifter - interest expense,
• Skatteberegning - tax calculation,
• Skattepligtig indkomst - taxable income,
• Skrå skatteloft - upper limit of tax to the municipality and to the state (excludes Labour Fund contribution and church tax),
• Sundhedsbidrag - health insurance contributions,
• Topskat - the highest tax threshold (15%).

- By 1 July - Danish entrepreneurs (and Danish non-tax residents) who are self-employed in Denmark. They will receive the document - Årsopgørelse, which includes the tax decision, after 2 July. - From 1 March to 1 May - persons with limited tax liability and Danish tax residents. - From 1 March to 1 June - those who wish to settle with their spouse for the previous tax year (and thus benefit from the Cross Border Tax Credit). The type of annual company tax return in Denmark depends on the form of business activity. Therefore, an entrepreneur, even before setting up a business in Denmark, should consider which form of business, and consequently, which form of taxation and annual return will be suitable for him/her (and at the same time, compatible with his/her expectations and possibilities). Even before setting up a sole proprietorship in Denmark, you need to choose the type of taxation for your business. You have a choice of one of three options:

• payment of tax like any individual in Denmark;
• payment of part of the tax as capital income and part as income of an individual;
• payment under the terms of Virksomhedsordning, the Danish Entrepreneurs Act.

The most common case is that the income from running a sole proprietorship, is considered to be the income of the business owner. Consequently, the formalities are simplified, and only one tax return needs to be filed.

If you wish to settle your tax electronically, you must order earlier a special eight-digit code - the TastSelv-kode - which allows you to access your tax information. You can do this via www.tastselv.skat.dk. Like any Danish taxpayer, you should receive a tax return (Selvangivelse) from SKAT, and a tax decision (Årsopgørelse) once you have settled your tax on time (by 1 July). However, it is important to note that documentation confirming the allowances included in the tax return should be kept by entrepreneurs for five years. Owners of Danish companies are required to pay 22 per cent corporation tax (CIT). However, if the annual turnover exceeds DKK 50,000, the amount of this tax increases to 25 per cent.

Income tax on Danish companies applies to their total income (including income from property and capital). Company owners receive a tax declaration form (Selvangivelse) from SKAT. They are required to complete it given all allowances and deductions and then submit it via the website www.skat.dk. They must make it by 1 July. Failure to submit the return on time may result in financial penalties (up to DKK 2,500). The type of settlement relating to this form of business, as in the case of self-employment, depends on the form of taxation chosen by the owner, even before the business is established. As a reminder, there is a choice of one of three taxation options: Such companies are considered to be physical entities. Consequently, the owners do not have to be liable with their own assets for their obligations. Liability is limited only to shares in the capital. The settlement of these companies follows the Danish Companies Act. The shareholders are not subject to the Act, which means that they are required to account for the income (remuneration) they receive, if any. This type of company is a physical entity, so taxation also takes place according to company law (IVS owners are not subject to it). Furthermore, according to the law, this company must prepare open financial statements every year.

1. Where to apply for the Danish NemID?
   
   • At your bank (if you have online banking),
   • at a Residents’ help point (you will need proof of identity, a CPR number and the completion of a special questionnaire),
   • at www.nemid.nu (for those who are registered in Denmark, have a driving licence in Denmark or a valid passport).
2. What is a NemKonto?
   A NemKonto is a bank account into which all payments from Danish public institutions are paid, e.g. tax refunds from the tax office or payments from the holiday fund (feriepenge). Everyone can choose which bank account will be designated as NemKonto. It is worth remembering that it can be a Polish bank account.
3. What is the Tastselv code?
   The Tastselv makes it possible to log on to the Danish tax authority's SKAT website and thus submit your tax return electronically. The Tastselv code can be ordered free of charge at tastselv.skat.dk/borger/bestilkode.
4. What are the deadlines for settling with SKAT in Denmark?
   Employed persons and Danish residents must submit their tax return for the previous year by 1 May. Danish entrepreneurs, on the other hand, must settle by 1 July. Failure to file a tax return may result in a financial penalty of up to DKK 5,000.
5. What websites might be useful for an entrepreneur in Denmark?
   a. The website of the Danish Customs and Tax Administration - Skattestyrelsen, skat.dk,
   b. The website of the Danish Aliens Office - Udlændingestyrelsen, nyidanmark.dk,
   c. website of the Danish Ministry of Employment - Beskæftigelsesministeriet, workindenmark.dk,
   d. the website of the information service for foreigners - International Citizen Service, icitizen.dk,
   e. Borger.dk website, lifeindenmark.dk.
6. What is begrænset skattepligt?
   Begrænset skattepligt is a limited tax liability. It is generally applicable to persons who work in Denmark, but for most of the year reside in another country and those who have a fixed-term employment contract.
7. Who is subject to unlimited tax liability in Denmark?
   Unlimited tax liability covers persons employed in Denmark who have an employment contract of indefinite duration.
8. What are the Danish income tax rates?
   
   • 8% for income below DKK 50 217;
   • 39.2% for income between DKK 50,217 and DKK 558,043;
   • 56.5% for income above DKK 558,043.
9. How much is the maximum income taxation in Denmark?
   By law, a Danish entrepreneur cannot pay more tax than 51.5% for the previous tax year.
10. What is the Selvangivelse?
    Selvangivelse is a tax return form that each taxpayer receives from SKAT at the address provided when registering.
11. What is Årsopgørelse?
    This is the Danish equivalent of a document called a tax decision, which contains the amount of tax refund or possible surcharge. The tax office usually sends it after 2 July.