Tax representation in Denmark

In Denmark, a tax representative is responsible for monitoring VAT matters and sharing responsibility for Danish tax liabilities. The need for a tax representative depends on the geographic location of the company. In some European countries, a tax representative is required to represent non-EU companies that need to register for VAT. If your company operates outside the EU and provides services or sells goods in Denmark, the appointment of a tax representative is mandatory.

What are the conditions for VAT registration in Denmark?

Companies are allowed, but not required, to register for VAT in Denmark if their annual revenues do not exceed DKK 50,000. Companies planning to reach this level of turnover should register for VAT no later than 8 days before the start of operations. On the other hand, if revenues exceed DKK 50,000 and the company is not yet registered for VAT, it must do so as soon as possible.

VAT registration in Denmark is required when engaging in trade in goods or services in Denmark, importing goods to other EU countries through Denmark, and receiving services on a reverse-charge basis by non-VAT companies. In addition, foreign direct-to-consumer (B2C) businesses that exceed the intra-Community sales limit and do not use the One-Stop Shop (OSS) VAT system must also register for VAT in Denmark. Organizing live events and providing taxable services also require VAT registration in Denmark, according to EU harmonization rules.

In Denmark, there are two VAT rates: the standard rate and a zero rate. Notably, unlike other EU countries, Denmark does not have any reduced VAT rate between these two. This makes Denmark unique within the EU. The standard Danish VAT rate is set at 25%, and it is applied to all goods and services that are not eligible for the zero rate. While Denmark maintains a consistent VAT system without reduced rates, it offers a 0% VAT rate on certain goods and services that are heavily taxed elsewhere in the EU. This zero rate applies to various sectors, including international and intra-community transport of goods and people, and newspapers and magazines published more than once a month. The 0% VAT rate also covers:
- insurance,
- medical services,
- financial services,
- cultural and artistic services,
- primary and higher education,
- sale of specific real estate,
- professional coaching.

To complete the VAT registration process in Denmark, foreign entrepreneurs can fill out the appropriate form via virk.dk. Once registration is successful, a DK-nummer, or Danish VAT number, will be sent to the mailing address previously provided. For company operations outside Denmark offering taxable goods or services, check whether non-resident VAT registration will also be required in this case. This kind of requirement stems from the EU VAT directive, according to which foreign companies are required to report all taxable operations and at the same time settle the corresponding VAT charges. For this, the VAT registration requirement is essential.

Under Section 47 of the Danish VAT Act, two or more individuals can apply for group VAT registration, subject to approval by the Tax Administration. This group registration allows the combined businesses to be treated as a single VAT-registered entity, though specific conditions may apply.

If a business operates through multiple divisions and keeps separate accounts for each, it can request separate VAT registration for each division, provided it obtains approval from the Tax Administration. The Tax Administration will reject divisional registration if it results in significant VAT charges on transfers between divisions or if it reduces the overall VAT costs due to adjustments in how partial input VAT deductions are calculated. Even if a business is registered as a separate division or as a single entity, it remains accountable for the VAT responsibilities of all its divisions.

Tax representation - basic information

The tax representative service allows one company to act on behalf of another interested in importing its products into the European Union. The activities of a danish fiscal representative include managing VAT returns and submitting the relevant VAT amounts to the tax authorities. In addition, it also handles the submission of the necessary Intrastat declarations in accordance with European requirements. With fiscal representation in Denmark, companies can focus on building a strong presence in the European Union market.

Limited tax representation focuses on acting on behalf of companies outside the European Union only in the context of importing goods and subsequently profiting from their turnover. The use of this type of representation is beneficial for a variety of business sectors, including both sea and air transportation. Limited tax representation services for companies involved in importing goods into the EU are also very popular. Limited tax representation requires only a single license, which simplifies the process of adding new clients as needed. This allows Danish tax representation to import goods into the EU without the need for immediate payment of import VAT, which significantly increases liquidity.

For businesses importing goods into Denmark, securing general fiscal representation is essential, especially when limited fiscal representation is insufficient. This need usually arises under the following circumstances:
- Transactions with other EU Member States.
- Imports from outside the European Union.

To facilitate these imports, the Danish tax authorities issue an Article 23 permit. This permit allows businesses to apply the reverse charge mechanism for VAT on imports, which implies VAT does not need to be settled immediately upon import and it can be declared and paid in the VAT return. This permit is available solely to non-Danish companies that have appointed a general fiscal representative.

In Denmark, a general tax representative is a Danish entity designated to manage all VAT-related affairs for a foreign company operating within the country. Typically, this role is fulfilled by customs brokers, logistics providers and accountants. These representatives oversee logistics and ensure adherence to Danish VAT regulations. They must offer a guarantee to the Danish tax authorities, usually matching the VAT amount expected to be owed by the foreign company each quarter.

The representative’s responsibility extends beyond this guarantee because the tax authorities have the power to review VAT payments for the previous five years. This could result in liability up to five times the amount of the guarantee. To reduce this risk, it is common for general tax representatives to require a matching guarantee from their foreign clients.

The role of a tax representative for European and foreign companies in Denmark

European companies are not required to appoint a fiscal representative in Denmark, but they do have the option of delegating an agent to handle tax matters with local authorities, which facilitates their interactions. In such situations, there is no need for a bank guarantee. However, the company remains entirely responsible for VAT settlements.

Non-European companies must use a danish fiscal representative to operate in Denmark. They cannot directly register for VAT in this country. This representative, usually a local company, acts on behalf of the outside company in dealing with the local tax authorities. He is responsible for ensuring full compliance with VAT requirements, including those that may be unfamiliar to the customer. Using fiscal VAT representation in Denmark not only meets legal requirements, but also provides a simple and cost-effective alternative to establishing a physical presence by setting up a branch or subsidiary.

With danish fiscal VAT representation, foreign companies can enter the Danish market without the cost and complexity associated with physically setting up a corporate structure and maintaining separate accounting procedures. In particular, a non-Danish company that appoints a VAT representative in Denmark avoids the obligation to pay corporate tax. A fiscal representative located in Denmark may require you to provide financial security, such as a deposit or bank guarantee, before agreeing to represent your interests.

What types of companies are required to have a tax representative in Denmark?

Companies that engage in taxable transactions in Denmark are required to register as VAT taxpayers in the country and to report and account for VAT. Companies from the European Union can manage these formalities themselves or use a tax agent. Non-European Union companies, on the other hand, must hire a tax agent to fulfill administrative requirements.
- Since non-EU companies must appoint a fiscal representative in Denmark, the representative shares responsibility with the foreign company. As a result, the client may be required to provide a bank guarantee or deposit as security for the danish representative.
- Companies based in the European Union, as well as Norway, Greenland, Iceland and the Faroe Islands, can register directly with the relevant local VAT authorities. They are not required to have Danish fiscal representation, but companies outside these regions may choose to delegate the time-consuming and sometimes complicated task to a local representative. There is also a lower cost for this service for EU-based companies, as they are not subject to joint liability. Our company will provide a local address for your company, handle all formalities in Danish, and coordinate all communications with local authorities.
- Before undertaking any taxable transactions in Denmark, each company should carefully review its compliance obligations and register accordingly.

Appointment of a tax representative

A foreign company involved in VAT-taxable transactions in Denmark may be required to appoint a danish fiscal representative. This representative, based in Denmark, will represent the company in its VAT obligations before the Danish tax authorities. Their tasks include settling VAT payments, filing VAT returns, conducting tax audits and claiming VAT refunds.

European partners, like suppliers, customers and trading platforms, regularly reject cooperation with non-European companies that do not have a fiscal representation in Denmark, considering it too risky for their business. The lack of a danish fiscal VAT representation also carries the risk of severe penalties from the Danish tax authority and prevents companies from claiming VAT refunds.

Scope of services provided by the tax representative

Ensuring compliance with local regulations for invoicing, VAT handling, bookkeeping and VAT reporting and payment is one of the key elements of the services offered by a fiscal representative located in Denmark.

Beyond these core responsibilities, a Danish tax representative often offers a range of additional services, including:
1. Advice on VAT compliance: providing guidance on local VAT rules and helping the company understand its VAT obligations and rights.
2. VAT registration assistance: facilitating the process of VAT registration, including dealing with necessary paperwork and communications with tax authorities.
3. Review and optimization: conducting periodic reviews of the company's VAT processes to ensure they are efficient and compliant, and suggesting improvements to optimize VAT recovery.
4. Handling VAT audits: representing the company during VAT audits, including preparing documentation and responding to queries from tax authorities.
5. Cross-border VAT issues: advising on VAT implications for international transactions, including intra-community supplies and exports, and ensuring compliance with cross-border VAT rules.
6. Training and support: offering training sessions for company staff on VAT-related topics to ensure that internal processes align with regulatory requirements.
7. Dispute resolution: assisting in resolving any VAT disputes or issues that may arise with local tax authorities.

Entrusting a tax representative with VAT responsibilities in Denmark

VAT regulations, both intra-community and Danish, are complex and change frequently. Declaration requirements are regular, although they vary in frequency. Penalties for violations or delays, as well as errors in estimating financial flows, can quickly lead to financial problems. Transferring responsibility for VAT to a danish fiscal representative is key to safeguarding your business, reducing your company's administrative burden, and effectively managing tax risks in Denmark. Avoid unnecessary risk and stress by entrusting the management of responsibilities to those with the necessary knowledge and experience.

Advantages of using a tax representative

VAT fiscal representation in Denmark offers a wide range of advantages that go beyond simply registering a foreign supplier. A Danish tax representative acts as a proxy for the foreign supplier, ensuring that its rights and obligations are respected. Hiring such a representative can lead to cost reductions and faster delivery of goods to customers in Europe, with other benefits as well. It also contributes to the reduction of VAT handling duties during importation and the reduction of administrative costs for the foreign supplier. In addition, the representative assumes responsibility for the partial settlement of VAT on the movement of goods.

As a foreign company, you have the option of taking advantage of the reverse-charge mechanism for imports by appointing a tax representative. In this way, you can transfer some responsibility for fulfilling import tax obligations to the tax representative, although you remain liable for your own tax obligations.

Our services provide comprehensive VAT-related services, including the registration and monitoring of tax obligations in Denmark. We'll help you avoid complicated paperwork and ensure compliance with Danish tax regulations, allowing you to focus on business development. Trust our experts and benefit from effective tax representation support!