Since 1 May 2008, it has been a legal requirement for all foreign companies that provide services in Denmark, and have employees based in Denmark for this purpose, to be entered in the Register of Foreign Service Providers in Denmark.
Company tax obligations are laid down in various Acts, Executive Orders and Guidelines. The most important ones are:
Companies must pay tax on their profits.
Public and private limited liability companies pay corporation tax on the company's profits. The rate is currently 25%.
Companies are covered by the on-account tax scheme, where payments on account are calculated as 50% of the company's average tax for the last three years. It is also possible to make voluntary payments.
The tax is paid twice a year on account, on 20 March and 20 November, with any outstanding tax collected on 20 November of the year following the year in which the income was earned, with surcharges. The company owner may draw money from the company, in the form of salary or dividends.
Companies with sales amounting to more than DKK 50 000 a year must register for VAT with the Danish Business Authority. Companies that are registered for VAT must pay VAT on their purchases and collect VAT from their customers.
VAT in Denmark is 25% for all product groups (26/08/2008). There are some exceptions to this rule.
Companies must keep VAT accounts and use them to submit a VAT return. This must state VAT on purchases and sales, as well as certain other duties, and the difference, i.e. the VAT due, is paid to the state at regular intervals. If there is a negative amount of VAT due, that amount will be paid to the company.
There are different tax periods and VAT payment deadlines. They depend on the company's turnover.
There are also different rules for paying VAT on sales and VAT on purchases, and it is important to be aware of them so that you pay the right amount to SKAT.
Duties (excise duties) are a type of consumption tax or environmental tax imposed on certain goods.
When a company engages in the production or wholesale trade of goods that are subject to duty, or purchases such goods abroad, it must collect duties on behalf of the state and pay them to SKAT.
A company's activities will decide which duties it must pay.
This applies to goods in sectors that include the following:
- Other taxes and duties
- Other stimulants
- Energy and carbon dioxide
- Environmental taxes
- Motor vehicles, etc.
- Tobacco products
Companies are registered for the payment of tax, VAT and other duties by the Danish Business Authority, and this may be done via virk.dk.
Submitting your tax return
When you register your company, you must also submit a provisional return for the anticipated revenue in the first year. You can submit this provisional return via the Self-Service system.
On the basis of the provisional statement, you will pay business tax in 10 instalments during the financial year, every month other than June and December. The provisional tax includes both the tax you have to pay from the company's profits and the labour market contributions you have to pay from the same profits.
You can choose between three sets of rules for taxation:
- the personal income tax rules;
- the business scheme;
- the capital scheme.
Regardless of the choice of scheme, you must pay labour market contributions.
Companies with turnover of more than DKK 300 000 a year must submit a tax balance sheet together with the tax return, no later than 1 July of year following the financial year.
Companies with turnover of less than DKK 300 000 a year must submit the extended tax return no later than 1 July.
Companies also collect VAT on their sales, on behalf of the state. The difference between a company's VAT on sales and VAT on purchases is then settled with the state.
Companies that pay an income to employees must be registered with the Danish Business Authority as employers with a reporting obligation. An employee is someone who works for the owner of the company, in exchange for payment.
Companies that have employees calculate the employee's income taxes (PAYE or "A-skat", and national insurance contributions or "AM-bidrag") and supplementary pension (ATP), which the company deducts from the salary paid to the employee and then pays to the state.
The employer must:
- Report employment information and order an e-Taxcard ("eSkattekort") electronically on e-Income.
- Calculate and report taxes (national insurance contributions ["AM-bidrag"] and PAYE ["A-skat"]) and supplementary pension (ATP) electronically on e-Income.
- The amounts must be deducted from the salary before it is paid. The amounts deducted must be paid to SKAT and ATP.
e-Income is a register containing monthly income information appearing on employees' payslips. The register also contains information on income from student loans, pensions, social services as cash benefits, etc. Reporting to e-Income ensures that nobody can report the same information more than once to different official authorities.
The reporting rules also apply to pension institutions, authorities that pay for taxable services and other income payers.
The company can report electronically by various means, including via SKAT.
If it is hard to estimate what the company is obliged to report and pay to the official authorities, it might be beneficial for the company to report and pay through LetLøn (EasyWage). LetLøn (EasyWage) is an electronic system that employers, auditors and payroll service providers can choose to use free of charge for tax calculations and reporting to SKAT, ATP, FerieKonto ("Holiday Account"), Statistics Denmark and the Confederation of Danish Employers.
LetLøn (EasyWage) obtains an e-Taxcard ("eSkattekort") and calculates the employee's PAYE, labour market contributions, supplementary pensions, holiday pay, etc., and sends the information to SKAT, ATP and FerieKonto. It can also direct payments to them at the same time.
The SKAT website contains tax guidelines for companies.