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.
Annual accounting for companies in Denmark - introductory information
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 nation follows a gradual tax system. The settlement is most often done electronically, via www.skat.dk
. You can also access E-tax for businesses (TastSelv Erhverv) to submit your VAT return. You can find there detailed guidance on the process of filing your VAT return, along with filing deadlines for declaring and paying taxes and payment methods. Prior to submitting your initial VAT return, it is important to confirm that you are registered for VAT at indberet.virk.dk. Please note, however, that you will need to order earlier NemID or Tastselv code and CPR (Personnummer) issued by Customs and Taxation. One you completed your VAT registration, you can continue. 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 Retårsopgørelsen / oplysningsskemaet. If your company is situated within a European nation and lacks a VAT number in Denmark, it will be necessary to electronically request a VAT refund from its residing country, adhering to the form and timeframe stipulated by Directive 2008/9.
Tax credits and deductions
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.
Companies established in Denmark 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 is in charge of declaring and paying VAT) and enter the buyer's registration number (CVR or SE-number).
European companies are not required to designate a VAT representative. Nevertheless, they can nominate a proxyholder (agent) to handle tax-related procedures on their behalf, aiming to streamline their interaction with the local tax authorities.
The situation is slightly different for U.S. businesses. The U.S.-Danish Bilateral Convention for the Avoidance of Double Taxation and the Prevention of Tax Evasion with respect to Taxes on Income has been in effect since 2000. In May 2006, the parties signed an amending protocol; the most important aspect concerns the elimination of withholding tax on cross-border dividend payments. On November 19, 2012. The United States and Denmark signed an intergovernmental agreement to implement the Foreign Account Tax Compliance Act (FATCA).
Annual accounting for a company in Denmark - the necessary documents
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. If a business, responsible for paying payroll tax under method 4, employs individuals, it is mandatory to submit both quarterly on-account payroll tax declarations and annual declarations for the full fiscal year. However, if the business does not have any employees, it is only necessary to submit the declaration for the income year.
Private limited companies, public limited companies, and corporate funds are required to create financial statements categorized according to company size in accounting classes. There are four distinct accounting classes labeled A, B, C, and D. Accounting class B is subcategorized into micro B and B, while class C is divided into medium-sized C and large C. Companies of the smallest scale fall under accounting class A, while those of the largest scale fall under accounting class D. The classification is based on the evaluated size of the company using two out of three parameters: net revenue, balance sheet, and the number of employees. If uncertain, your business registration certificate, accessible in E-tax for businesses (TastSelv Erhverv), indicates whether your business is classified as small or large.
Terms that can be found in settlement documents
- 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%).
Annual tax return in Denmark - deadlines
Familiarize yourself with an overview of deadlines for declaring and settling VAT payments.
- 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).
- Typically, tax on account (provisional tax) is remitted every four months on the following dates: April 30th, August 31st, and December 21st.
Meeting the deadline entails obtaining a receipt for your declaration prior to midnight on the final due date for payment. For businesses with a non-uniform fiscal year, the deadline for submission of the settling payroll taxes and settlement period is appropriate based on the business structure and the conclusion of the business's fiscal year. If you fail to meet the reporting deadline, starting from 1st July 2023, you will incur interest from the initial payment deadline date. If your business is new, is less than DKK 5-50 million or you have requested quarterly settlement, you are required to report your VAT return quarterly for at least 18 months. In the event that your annual revenue subject to VAT is less than DKK 5 million and you have consistently filed your VAT return and paid on time, must file a VAT return every six months. It is not possible to apply for a longer settlement period, but you can request a shorter settlement period. Following this, the Danish Tax Agency (Skattestyrelsen) will assess your business revenue and possibly change the settlement period, necessitating a biannual submission of the VAT return. It evaluates every November whether the VAT settlement duration is appropriate based on your VAT declarations made for the preceding period spanning from 1 July of the previous year to 30 June.
If we assess that your annual business revenue subject to VAT is more than DKK 50 million, or if you have personally requested monthly settlement, you must file your VAT return on a monthly basis.Irrespective of whether the settlement period is on a monthly or quarterly basis, the deadline for all three schemes will fall on the final day of the month after the end of the quarter. According to the TAL 2019, which became effective from 1st October 2019, the deadline for clearing the ultimate tax obligation is set at 21 days from the notice sent by the IRD. Failure to declare vat return and pay tax within 21 days of receiving the notice will lead to the taxpayer being classified as in default. It is advisable to submit your payment just before the deadline and not earlier than five working days before the deadline. You have met the deadline if you get a receipt for your declaration before midnight and funds are debited from your business account on the final due payment. Payment on the last working day before the final due should be an absolute last resort. If you don't make it in time and you are charged based vat on an estimate, you may be charged extra.
In the case of EU sales exclusive of VAT, it is necessary to report them on a monthly basis in the 'Moms' (VAT) section of E-tax for businesses (TastSelv Erhverv).
Annual company return in Denmark - types
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).
Accounting for sole proprietorships in Denmark
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.
Settlement of Danish companies
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 standard rate for corporate income tax is 25 percent, with an extra 6 percent surcharge added to the tax payable, resulting in a total corporate tax rate of 26.5 percent.
In the case that you are entitled to a refund, an amount owed to you will be displayed as a positive figure marked with a plus sign in the payments to your tax account.
For individuals from outside the EU countries, the European Economic Area (EEA), or Switzerland (including UK citizens), it is necessary to seek the relevant residency permit before setting up a company. This process is facilitated via the New to Denmark platform.
General Partnership (Interesselskab - I/S)
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:
Limited liability company (Anpartsselskab - ApS) and joint stock company (Aktieselskab - A/S)
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.
An application with the DBA enables the establishment of a foreign company's branch. Entities from the EU and European Economic Area (EEA) can establish branches in Greenland and Denmark without additional DBA authorization. Conversely, companies not affiliated with the EU/EEA must acquire approval before proceeding with registration.
Limited liability company (Iværksætterselskab – IVS)
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.
- 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).
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- What is the Selvangivelse?
Selvangivelse is a tax return form that each taxpayer receives from SKAT at the address provided when registering.
- 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.
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