Similar to sales tax in the U.S., value-added tax (VAT) is a standard consumption tax collected by many countries. But unlike sales tax, which is collected only at a product’s final point of sale, VAT is applied at each stage of the supply chain. Businesses collect VAT on sales (outputs) and claim credits for VAT paid on purchases (inputs). At the end of the manufacturing or production process, the final consumer pays the total tax.
Worldwide, VAT is the most common type of consumption tax, and it is imposed by all EU member states. These countries follow the same general VAT framework; however, under Directive 2006/112/EC, each member sets its own rates and rules.
For companies selling to customers in Denmark, Danish VAT rules apply. Since July 2021, the EU's OSS (One-Stop Shop) and IOSS (Import OneStop Shop) schemes have made it easier for non-EU businesses to sell into the EU, but sellers must still comply with each country’s rules.
If you have customers in Denmark, several considerations, including accurate invoicing, timely reporting, and proper recordkeeping, are essential, particularly given Denmark’s reputation for rigorous tax enforcement and proactive digital monitoring.
One VAT rate
Denmark stands out in the EU with a single standard VAT rate of 25%, which is currently the highest among EU member states.
Unlike most EU countries, Denmark does not offer reduced or super-reduced rates, making the system relatively straightforward but potentially more costly for consumers. For example, other countries have lower rates on essentials like food or public transportation.
Zero-rated products
Zero-rated products are those that are taxed at 0% but still allow purchasers to claim VAT credits on inputs. In Denmark; these include:
- Exports
- International passenger transport
- Some newspapers
- Certain seagoing vessels
Exemptions to this rule (meaning that no VAT is charged and there is no input VAT credit allowance) include:
- Financial and insurance services
- Healthcare and medical services
- Education
- Residential letting (renting) and the sale of used residential property
- Cultural and sports activities run by nonprofits
- Betting and lotteries
The distinction between zero-rated products and exempt zero-rated products matters when you’re assessing cost implications for your business.
Companies that operate in both taxable and exempt sectors must carefully apportion input VAT to avoid errors that could lead to denied deductions or even backdated assessments.
Registering for VAT
Any business making taxable sales in Denmark above the registration threshold must register for VAT. The Danish Tax Agency (Skattestyrelsen) handles VAT registrations through the MOMS system.
Once registered, businesses must fulfill ongoing compliance obligations, including filing returns, maintaining records, issuing correct invoices, and submitting to audits.
Resident vs. non-resident businesses
- Resident businesses must register when their annual taxable turnover exceeds DKK 50,000. This is a low threshold by global standards, so even small businesses may meet it.
- Non-resident EU businesses can register directly with the Skattestyrelsen. The process is relatively accessible, although some procedural elements may require Danish-language support or localized knowledge.
- Non-EU businesses are required to appoint a Danish fiscal representative, who shares liability for VAT obligations. The representative must reside in Denmark or another EU country approved by Danish authorities and is jointly responsible for compliance, including payment of VAT and responding to enforcement actions.
Who needs to register
The scope of registration is generally broad. In particular, these parties are obligated to register:
- Domestic suppliers of taxable goods or services
- Distance sellers not using the OSS scheme
- Event organizers collecting admission in Denmark
- Online marketplaces that qualify as deemed suppliers under EU e-commerce rules
Even occasional sellers or event-based businesses may have VAT obligations if activities are taxable and turnover exceeds the threshold. Danish authorities take a close interest in marketplaces and service providers, especially those operating online, due to the rapid growth of the digital economy.
How to register
Registration is done online through the Business in Denmark portal (Virk). Businesses must apply at least eight days before taxable operations begin. Once registration is approved, the system issues the business a CVR/VAT number.
Applicants need to provide identity documents, business activity details, and representative information if applicable. Although the system is digital, applicants should expect close scrutiny and potential follow-up requests from the Skattestyrelsen.
Working with a tax representative
EU-based businesses may choose to work with a local agent for convenience, since a local agent can assist with Danish-language forms, tax queries, audits, and liaising with the Skattestyrelsen. For non-EU businesses, working with a representative is not optional.
Representatives must meet Danish criteria and accept joint liability for VAT debts. These intermediaries often provide additional services such as filings, document retention, and audit assistance, making them valuable partners in complex operations.
When to charge tax (EU and Denmark)
VAT liability hinges on where the supply takes place, the nature of the goods or services, and whether the customer is a business or a consumer.. In the EU, these rules are standardized, but interpretation can differ slightly among member states.
Taxable products and exempt products
Taxable:
- Physical goods (including imports)
- Software, SaaS, and apps
- Digital goods, E-books and streaming subscriptions
- Restaurant and catering services
- Telecommunications
- Repairs and maintenance services
Exempt:
- Financial and insurance services
- Healthcare
- Education
- Residential property
- Cultural or sporting events by nonprofits
- Digital courses that meet Danish education criteria
Businesses must determine the status of each product or service they sell. Some offerings, like digital courses, fall into gray areas and require a careful legal review. The Danish Tax Agency provides limited guidance on such classifications, so many companies seek outside tax advisory support to avoid unintentional misclassification.
B2B vs. B2C sales
- B2B (business-to-business) sales within the EU: These transactions are typically exempt from VAT under the reverse charge mechanism when a valid VAT number is provided. The burden of accounting for VAT shifts to the buyer, which must record the transaction in its own VAT return.
- B2C (business-to-consumer) sales within the EU: Danish VAT applies when the customer is based in Denmark. For digital services, the VAT rate of the customer’s country applies through OSS. Goods sold from Danish warehouses to Danish consumers are taxed at 25%.
Whether a sale is B2B or B2C affects pricing, invoicing, and reporting requirements. Failure to identify customer status correctly may result in under-collected VAT and administrative penalties.
Marketplace facilitators
Since July 2021, online platforms can be considered "deemed suppliers" in several different scenarios, including:
- Goods imported into the EU valued at up to €150
- EU-stored goods sold by non-EU businesses.
In both of these cases, the platform collects Danish VAT and fulfills VAT obligations, and if the platform relies on the seller's VAT registration, then accurate registration data must be provided and verified. Many platforms have adopted automated solutions for compliance, but sellers remain responsible for providing valid data.
VAT deductions
VAT paid on business expenses is usually deductible. However, deductions depend on how the item or service is used:
- Used only in taxable activity: 100% deduction allowed.
- Mixed use: The deduction must be apportioned.
- Private or exempt use: No deduction is allowed.
Expenses like passenger vehicles and entertainment often face deduction restrictions. Maintaining clear purchase records and use justifications is important. Businesses may be asked to show evidence of use during an audit or spot check.
Statute of limitations
The Skattestyrelsen can assess additional VAT up to four years after a reporting period ends. If fraud or gross negligence is involved, this period stretches to ten years.
Businesses should retain supporting documents for at least five years to reduce risk during audits. Electronic storage is acceptable, as long as records are easily retrievable and kept in a secure, tamper-resistant format.
Staying compliant with Danish VAT regulations
Beyond understanding when VAT applies and how to register, businesses must also focus on proper documentation and timely submission of required forms.
Danish VAT compliance rests on three pillars: issuing valid invoices, filing returns on time, and preserving accurate records for the required duration.
Invoicing requirements
Invoices in Denmark must be detailed and include all of the following information:
- A sequential invoice number that uniquely identifies the document.
- The date the invoice is issued.
- The full name and address of both the supplier and the customer.
- The supplier’s Danish CVR/VAT number.
- A clear description of the goods or services provided.
- The quantity and unit price of each item.
- The date of supply, if it differs from the invoice date.
- The total, excluding VAT, VAT rate, VAT amount, and total including VAT.
- An explanation if the reverse charge mechanism is applied, or if an exemption applies.
Simplified invoices may be used for transactions below DKK 3,000, but those invoices must still contain basic information such as the supplier’s identity, the type of goods or services, and the applicable VAT rate and amount.
Filing VAT returns
All VAT returns must be submitted electronically directly through TastSelv, the Danish online tax portal. The particular filing frequency depends on the business’s annual turnover:
- Monthly for businesses with a turnover exceeding DKK 50 million
- Quarterly for businesses with turnover between DKK 5 million and DKK 50 million
- Semi-annual for businesses with turnover below DKK 5 million
Newly registered businesses must file quarterly for the first 18 months, regardless of their revenue. Late submissions trigger an automatic DKK 800 fine and may result in a provisional assessment of tax owed.
Other required forms
In addition to regular VAT returns, businesses involved in intra-EU trade may need to submit:
- An EC Sales List (ESL): Lists cross-border sales to other EU countries.
- Intrastat declarations: Required when the value of goods traded across borders exceeds DKK 11 million per year, used for EU trade statistics.
Both forms must be submitted on time to avoid administrative penalties.
Filing deadlines
Filing deadlines are strictly enforced, and are as follows:
- Monthly filings are due by the 25th of the following month.
- Quarterly filings are due on March 1, June 1, September 1, and December 1.
- Semi-annual filings are due on March 1 and September 1.
Payment must be made by the same deadlines, as any delays will trigger interest charges of 0.7% per month and may affect a business’s standing with tax authorities.
Recordkeeping Requirements
When it comes to recordkeeping, businesses must retain the following for a minimum of five years:
- Sales and purchase invoices.
- Bank statements and receipts.
- Contracts and agreements related to taxable transactions.
- VAT returns and supporting documentation.
- Proof of export or intra-EU dispatch.
Digital records are acceptable as long as they are secure, properly formatted, readable, and available to the Skattestyrelsen upon request. Using accounting software is highly recommended to help keep all records organized and easily accessible.
Risks of noncompliance
Companies that fail to meet Danish VAT obligations face several significant consequences, including:
- A fixed fine of DKK 800 per late VAT return.
- Monthly interest on overdue VAT liabilities.
- The reassessment of taxes due, with penalties of up to 200% in severe cases.
- Denial of input VAT deductions for missing or noncompliant invoices.
- Potential criminal prosecution for deliberate evasion or fraud.
Danish tax authorities use advanced digital tools to cross-check data from VAT returns, bank records, and trade declarations. Discrepancies often lead to audits.
Tips on staying compliant with Danish VAT regulations
Businesses can take several practical steps to reduce risk and simplify VAT compliance in Denmark:
- Register promptly as the DKK 50,000 threshold approaches.
- Validate EU VAT numbers through the VIES system for B2B sales.
- Use invoice templates with required fields to avoid missing information.
- Regularly reconcile VAT returns with accounting data.
- Automate exchange rate calculations for foreign currency invoices.
- Monitor deadlines using a shared compliance calendar.
- Keep backups of all records in secure digital storage.
Software solutions
Leveraging dedicated tax technology can greatly cut down on the burdens that come with compliance. Some of the more important features to look for in them include:
- EU place-of-supply logic for digital and cross-border sales.
- Automatic invoice generation with VAT breakdowns.
- Support for OSS and IOSS filings.
- Real-time VAT number verification through VIES.
- Integration with accounting and ERP systems.
- Future support for Denmark’s SAF-T standard, which is expected in upcoming tax reforms.
Software solutions like Numeral are designed to streamline VAT compliance. With Numeral, businesses gain visibility into their VAT obligations and can trust that filings are accurate and timely.
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Final thoughts
Denmark’s VAT system is relatively simple in terms of structure, due to the single standard rate, but it rigorously enforces compliance. Businesses must make sure to register on time, issue valid invoices, and keep detailed records of their transactions.
With the rise of e-commerce and digital services, cross-border compliance has grown even more complex, particularly for non-EU sellers. Taking advantage of tools like Numeral, along with proactive compliance processes, can help businesses stay aligned with Danish VAT rules, reduce potential exposure to penalties, and improve operational efficiency.
