Accounting for a business in Denmark
Annual settlement of a business in Denmark
If you own a business in Denmark, you must regularly file tax returns with SKAT, the country's tax authority. If you have a business in Denmark, you can use the electronic option to file your annual accounts. To do so, they use the official website www.skat.dk and use their assigned special code, known as NemID or Tastselv. Businesses in Denmark also need a CPR (Personnummer) number, which is assigned by Customs and Taxation, to settle income tax and VAT.
What should you know about annual settlements for companies in Denmark?
- When you are self-employed in Denmark, you are obliged to file an annual tax return and are able to take advantage of individual tax benefits - Personfradrag, the value of which is determined annually.
- Entrepreneurs in Denmark can also take advantage of other tax benefits and add them to their annual returns. Included in this set is relief for renting an apartment in Denmark (a rental agreement is required), relief for the cost of utilities in rented accommodation (receipts or proof of payment must be provided), and relief for travel expenses (e.g., to your home country, including coach, air and sea tickets and highway tolls).
- SKAT sends a special form - Selvangivelse - for the tax return, which goes to the entrepreneur. It is filled out with tax data and forwarded to the address provided.
- Entrepreneurs in Denmark must make a settlement with the Danish tax before July.
- After July 2, SKAT (Skattestyrelsen) provides the Danish entrepreneur with a document - Årsopgørelse, which presents the tax decision. Depending on the case, this can be the amount to be refunded (Skat til udbetaling, usually marked in green) or paid (Restskat til betaling, usually marked in red).
- To check your individual settlement, log in to your SKAT account and click "Se årsopgørelsen." Click "Ret årsopgørelsen/oplysningsskemaet" to make corrections and take into account the deductions you are entitled to.
- The tax to be refunded is transferred to the previously registered NemKonto account by the Danish entrepreneur.
- The term "Personlig indkomst" means individual income after taking into account ATP pension contributions and allowances for pension insurance.
- The term "Kapitalindkomst" refers to capital income, such as interest (e.g., from bonds, investments or deposits) after deducting interest expenses on loans taken out.
- Capital income (kapitalindkomst) and deductions from it (fradrag and kapitalindkomst) can be seen in the annual tax returns provided by SKAT.
- "Renteindtægter" is interest income, and "Renteudgifter" is interest expense.
- Businesses in Denmark have the opportunity to file a tax return, correct it and appeal SKAT's decision for three years.
- A Danish entrepreneur can deduct insurance premiums, child support, pension contributions, commuting expenses and food expenses from tax. However, the Danish tax authority has the right to audit the accuracy of these expenses within 7 years.
- Danish companies can take advantage of reverse taxation, which allows foreign companies offering goods and services in Denmark to avoid charging Danish VAT. In such cases, the tax is not included in the invoice, and only the net value of the goods or services is given. The template for this is ready, such as Reversed charge, which means that the buyer must charge and pay VAT on the service and provide the CVR or SE number (buyer's registration number).
- All companies offering goods or services in Denmark are required to pay 25% fixed VAT. This is a value-added tax applied to the price of services and goods offered by the company, and it is what businesses must account for in their annual tax returns.
- Danish business owners must register for VAT before they start providing services or goods (they have 8 days to do so).
- VAT regulations apply to all Danish companies whose annual turnover exceeds DKK 50,000. In this case, they must register as VAT payers through the RUT platform, known as the Register of Foreign Suppliers (virk.dk).
- When a Danish taxpayer's annual income does not exceed 42,900 Danish kroner, they are entitled to a full tax refund.
- Entrepreneurs in Denmark do not pay more tax than 51.5% of their income for the previous tax year.
- Individuals doing business in Denmark are required to file an annual tax return with the Danish tax authorities. These declarations take into account all income, both domestic and foreign, according to the double taxation treaty.
Declaration process and tax analysis
As part of the July 1 deadline, those engaging in activities in Denmark (which includes tax non-residents) must fulfill their tax obligations to the Danish state. Due to the current pandemic situation, the tax return filing date for 2019 has been moved to September 20, 2020.
The period from March 1 to May 1 is the time when persons with limited tax liability and tax residents in Denmark should meet their tax return obligations. If you are interested in taking advantage of the Cross Border tax benefit and the need for joint taxation with your spouse for the past tax year, the deadline for settling these issues is June 1.
After July 2, the tax authority SKAT (Skattestyrelsen) creates and transmits to the country's residents the document Årsopgørelse, which contains the official tax decision. This decision determines whether the taxpayer is entitled to a refund (Skat til udbetaling, marked in green) or should make a surcharge (Restskat til betaling, marked in red).
Business owners in Denmark have the ability to amend their tax return, make a correction or appeal SKAT's decision, up to three years and four months back.
Danish entrepreneurs are entitled to tax benefits, but the state fiscal has a five-year prerogative to verify the accuracy of the information contained in the return. For this reason, Danish business owners are obliged to keep full documentation, confirming all expenses incurred during this period.
List of documents required for annual company returns in Denmark
If you have a business in Denmark, it is necessary to submit an annual tax return to the Danish Customs and Tax Administration. When you have employees, there is also an obligation to provide them with all the required documents for the correct submission of the tax return.
Important paperwork related to the annual company return in Denmark include:
- Arspogorelse, is the official paper sent by SKAT after July 2, which presents the tax decision (refund or surcharge).
- Oplysningsseddel, is the equivalent of the Polish PIT-11, presenting the employee's salary range. At the end of the year, every employer in Denmark must provide such a document to employees.
- Selvangivelse, is a tax return form, delivered by the Danish Tax Authority (SKAT) to the address provided during registration, regardless of whether it is a Danish or Polish location.
- Lonseddel, is the regular weekly or monthly payroll reports that an employee receives. Every employer in Denmark is required to provide such documents to its employees.
Differences in annual declarations in Denmark
How companies file their annual tax returns with SKAT depends on the entrepreneur's choice of business type.
There are differences in taxation between categories such as individual Danish businesses and limited liability companies, joint stock companies, limited partnerships or general partnerships. It is worth considering which business model in Denmark and which approach to taxation and annual settlement with the Danish Tax Authority will best suit your needs and available resources.
There are several types of business tax returns in Denmark, and these are:
- Annual tax return Enkeltmandsvirksomhed - aimed at sole proprietorships.
- Annual tax return Aktieselskab - A/S - aimed at joint stock companies.
- Annual tax return Interesselskab - I/S - for general partnerships.
- Annual tax return Anpartsselskab - ApS - aimed at limited liability companies.
- Annual tax return Kommanditselskab - K/S - for limited partnerships.
- Annual tax return Filial af udenlandsk selskab - assigned to branches of foreign companies.
- Salgskontor annual tax return - for representative offices of foreign companies.
- Andelsforening/Brugsforening annual tax return - for cooperative associations.
- Annual tax return Iværksætterselskab - IVS - aimed at limited liability companies (as of January 1, 2014).
Danish company owners must deliver their tax returns for the previous tax year by July 1.
A sole proprietorship in Denmark (Enkeltmandsvirksomhed)
In Denmark, the tax authority, Skattestyrelsen (SKAT), recognizes earnings earned during self-employment (Enkeltmandsvirksmhed) as income for the business owner. Accordingly, business taxation is reported through a single return. Entrepreneurs who pay taxes and contributions are also entitled to health and pension benefits, analogous to regular Danish employees. It is mandatory to provide a tax return every six months or quarter, through the SKAT online platform, covering both income tax and VAT.
In terms of income tax, advance payments must be made on two dates: March 20 (a high advance payment allows you to receive a tax refund with interest, which is higher than at the bank) and November 20 (the interest rate on this date is 0.4 - meaning the interest is lower than at the bank).
For sole proprietors in Denmark, an important deadline is to file the tax return for the previous tax year by July 1. Through the SKAT website, when submitting a tax return, the entrepreneur automatically receives feedback regarding the tax decision.
It's also worth knowing about the annual tax return procedure for the self-employed in Denmark. Danish entrepreneurs who wish to file an online return must first request a special code known as TastSelv-kode (available at tastselv.skat.dk), consisting of 8 digits. This personal TastSelv-kode (or NemID) guarantees access to private tax information.
Business owners in Denmark receive a Selvangivelse document from SKAT, which is a form for filing tax returns, and after July 2 they receive a tax decision - Årsopgørelse.
In Denmark, entrepreneurs are allowed to deduct certain expenses from tax, such as:
- costs associated with the purchase of goods for resale,
- expenses for insurance policies for the company,
- fees for renting premises,
- expenses for a computer network,
- telephone costs,
- costs related to the company car,
- office maintenance and repair costs,
- heating costs,
- electricity expenses,
- costs of purchasing machinery, equipment and appliances (if they were not deducted at the time of purchase, they can be entered as depreciation expenses),
- costs related to inventory,
- expenses for auditing services,
- legal costs,
- equipment, machinery, goods and devices that are used privately, even if purchased for the company, are not tax deductible in the company's annual return,
- documentation related to the use of deductions that were included in the Danish company's annual return should be kept for five years.
Filing tax returns in Denmark is done through an online platform within 6 months of the end of the tax year (whether a calendar year or another 12-month period). If the tax year closes between February 1 and March 31, the tax return must be filed by August 1 and tax paid by March 20 and November 20.
Owners of sole proprietorships in Denmark must choose one of three available options for taxing their company:
- taxation according to share capital regulations (Kapitalafkastordning), allowing part of the company's profit to be transferred to personal income and part to capital income,
- taxation of profit as personal income, analogous to employees,
- taxation according to the provisions of the Enterprise Act (Virksomhedsordning), allowing interest expenses to be tax deductible and the company's savings to be retained in the form of bank deposits, an advantageous solution.
Interesselskab, Anpartsselskab, Iværksætterselskab
For Danish entrepreneurs who decide to establish and manage companies in Denmark, the main obligation is to settle the 22% corporate tax. When the annual turnover of such a company exceeds DKK 50,000, the company becomes a VAT payer at 25%.
For any company operating in Denmark, it is necessary to settle income tax, covering total income, including income from property and capital. This process should be completed within six months of the end of the fiscal year.
The annual tax liability of a general partnership (Interesselskab - I/S) depends largely on the owner's previous choice of taxation form. The person in charge of the general partnership must choose from three options:
- Taxation in accordance with returnable capital regulations (Kapitalafkastordning), allowing part of the profit to be transferred to personal income and part to capital.
- Taxation of profit as personal income, as in the case of employees.
- Taxation under the terms of the Enterprise Act (Virksomhedsordning), which allows for the deduction of loan interest expenses and the retention of profit in the form of bank savings.
The annual accounts of limited liability companies (Anpartsselskab - ApS) and joint-stock companies (Aktieselskab - A/S) relate to the taxation of those companies that, as individuals, are not personally liable for the company's obligations, but have a share in the capital. Individuals associated with such companies are taxed on their income or dividends received.
Limited liability companies (Iværksætterselskab - IVS) are taxed according to company regulations, although IVS owners are not required to be taxed under the same rules, since the company is a physical entity. IVS is required to submit annual financial reports.
Company owners in Denmark must file their tax returns by July 1. The Selvangivelse form from SKAT is forwarded to owners, who fill it out, taking into account available reliefs, and then submit it via www.skat.dk. Owners of Danish companies are also required to submit open financial reports.
Open financial reports of companies in Denmark should include:
- a summary of the company's business management,
- annual balance sheet,
- income statement,
- a statement of changes in equity,
- additional information.
Frequently asked questions
- What are the deadlines for filing a tax return with the Tax Authority in Denmark?
Taxpayers who work or are residents of Denmark must submit their tax return for the most recent tax year by May 1. Danish entrepreneurs, on the other hand, have until July 1. This deadline is determined by SKAT and is shown on the Selvangivelse form that is provided to the taxpayer. If the declaration is not filed, there is a possible penalty of 5,000 Danish kroner. A person who pays taxes in Denmark has 3 years and 4 months to correct the return for a given tax year.
- How can I get a Tastselv code?
To get a Tastselv code, you need to follow these steps:
- Visit www.skat.dk.
- Click "Log på."
- Then select "Bestil kode".
- Select "TastSelv kode."
- Enter your CPR number with a dash in the blank field.
- Choose whether you want to receive your password via SMS, e-mail or mail.
- Once you receive your code, log in to skat.dk by selecting "Log på med TastSelv kode."
- Enter your CPR number and wait for the code.
- Create a new password with between 8 and 16 characters. Repeat the password and click "FORTSÆT."
- After these steps, you will have access to your account using the TastSelv code.
- How can I change my mailing address at the office?
You can update your mailing address at Borgerservice.
- Which websites are useful for entrepreneurs in Denmark?
It is useful to know the following websites if you are an entrepreneur in Denmark:
- Danish Customs and Tax Administration website - Skattestyrelsen, skat.dk.
- The website of the Danish Foreigners Authority - Udlændingestyrelsen, nyidanmark.dk.
- Site of the information service for foreigners - International Citizen Service, icitizen.dk.
- Site of the Danish Ministry of Employment - Beskæftigelsesministeriet, workindenmark.dk.
- Borger.dk website, lifeindenmark.dk.
- What terms are found in the annual tax return?
The following terms can be found in the annual tax return in Denmark:
- Bundskat: Bottom tax (8%).
- Topskat: The highest tax threshold (15%).
- Skrå skatteloft: Upper tax threshold to the municipality and the state, excludes Labor Fund contribution and church tax.
- Personlig indkomst: Personal income from work, includes benefits, pension contributions and Labor Fund contributions.
- Skattepligtig indkomst: Personal and capital income after deducting deductible expenses, taxable.
- Ligningsmæssige fradrag: A deduction for municipal and health taxes.
- Kapitalindkomst: Capital income, interest income after deducting interest expenses.
- Fradrag: Relief deducted from income.
- Kommuneskat: Municipal (municpal) tax.
- AM-bidrag: 8% contribution to the Labor Fund.
- Lønindkomst (inkl. fri bil/telephone): Income from work (includes company car/phone).
- Eget pensionsbidrag: Own pension contribution (5%).
- Personalegoder: Employee allowances, such as health insurance.
- Renteindtægter: Earnings from interest.
- Renteudgifter: Interest expense.
- Beskæftigelsesfradrag: An allowance for labor.
- Befordringsfradrag: Relief for travel expenses.
- Håndværkerfradrag: Relief for craftsmen.
- Skattepligtig indkomst: Taxable income.
- Skatteberegning: The calculation of tax.
- Ejendomsværdiskat: Property tax.
- Personfradrag bundskat: The amount free of bottom tax.
- Personfradrag kommuneskat: Municipal tax free amount.
- Beregnet skat: Calculated tax.
- What are the income tax rates in Denmark in 2019?
The following income tax percentages apply in Denmark for 2019:
- 8% for income up to DKK 50,217,
- 39.2% for income from DKK 50,217 to DKK 558,043,
- 56.5% for income above 558,043 DKK.
- How much is the car tax in Denmark?
Denmark has a luxury tax, which can be as high as 180% of the net price of a purchased car.
- What does "begrænset skattepligt" mean?
The term "begrænset skattepligt" refers to a limited tax obligation.
- What is "sundhedsbidrag"?
"Sundhedsbidrag" is health insurance premiums.
- When must companies in Denmark file an annual tax return?
Danish businesses must file their annual tax return for the last year before July 1 with SKAT.