Accounting and tax rules for companies in Denmark: Why working with an accountant is essential

In Denmark, it's a good idea for companies of all sizes and industries to work with an accountant. Even larger companies find it convenient to outsource accounting services, even if they only need some of the services offered and not the full package.

All Danish companies are required to comply with the laws related to registration, licensing, and yearly accounting and reporting. If you want to learn more about the accounting rules in Denmark, keep reading below.

Understanding the accounting principles used in Denmark

Denmark is a part of the European Union, which means they follow certain accounting and financial reporting rules set by the EU Directives and Regulations.

The Danish Business Authority and the Danish Financial Supervisory Authority are responsible for financial reporting and auditing in Denmark.

Danish companies use the International Financial Reporting Standards (IFRS) as their accounting rules.

When it comes to taxes for companies, it's important to keep in mind that there are a few main ones to consider:

- Corporate income tax is at a rate of 22%.

- Dividends paid to a resident company have a 27% withholding tax, but there's a 5% reclaim percentage which reduces the effective rate to 22% in some cases.

- There's a standard value-added tax rate of 25%, and certain services have a reduced VAT rate of 0%.

Submitting tax returns in Denmark: Who is required to file?

Anyone who earns income in Denmark, whether they're employed, self-employed, or earning foreign income, must file a tax return. The Danish tax authorities will automatically assess your tax based on the income you report. If you need to make changes to the automatic tax assessment, you must do so before May 1st following the end of the tax year. For companies, the taxable year is the same as the calendar year, although corporations can choose a different 12-month period.

In Denmark, companies can choose joint taxation, which is either mandatory (for legal entities in the same group) or voluntary international taxation. If you're a foreign employee or investor and need help filing your tax return for the first time, our Danish lawyers are here to help and answer any questions you may have.

Due dates

Every year, companies create financial statements to summarize their financial activities. These statements are usually made for the same period as the calendar year, but companies can choose a different time frame if they prefer. To file their tax returns, businesses adjust their financial statements to account for taxes owed, and they must submit their tax returns no later than 6 months after the end of their chosen accounting period.

If you want more information about tax laws in Denmark and what the Tax Department and Danish tax authorities (SKAT) require, you can contact our law firm.

While Danish tax authorities may audit companies, only larger companies or groups are required to undergo an annual audit. A company is exempt from an audit if, for two consecutive reporting years, it doesn't meet two of the following criteria: a balance sheet totaling DKK 4 million, a net revenue of DKK 8 million, or an average of 12 full-time employees during the reporting period.

What is the appropriate time to get in touch with an accountant in Copenhagen for my company?

Once you start your company, you can contact us for accounting services. You may also want to switch to our services if you previously had an in-house accounting team or if you want to change your current accounting provider. If you already work with our lawyers, it will be convenient to work with our accountants too.

We provide customized accounting solutions based on your company's size and your business goals. We offer temporary accounting and auditing services, as well as long-term partnerships for companies in all industries.

To learn more about our accounting services and prices, you can contact us and tell us about the services you need. We charge hourly rates, and the size of your company and number of employees will impact the number of hours we spend on your accounting each month.

Different accounting services require different amounts of time, and we charge separate hourly rates for annual reports and income tax returns and for bookkeeping services. Small companies and sole traders will need fewer accounting hours than larger companies such as an ApS or an A/S, which will be reflected in the budget for accounting services.

Tax minimization strategies for companies and foreign citizens in Denmark

Tax minimization means taking legal steps to reduce the amount of taxes a company or a foreign individual relocating to Denmark has to pay. If you're interested in learning more about tax minimization for companies, our law firm in Denmark can provide you with information.

Before trying to minimize taxes in Denmark, it's important to know that the country has a corporate tax rate of 22% and is generally considered to be tax-friendly. From a residency standpoint, only companies that are considered residents in Denmark will be taxed. Branch offices of foreign companies operating in Denmark will also be taxed. To minimize taxes, double taxation treaties can be very effective because they allow for many levies to be deducted. Our lawyers in Denmark can provide information on tax legislation related to double tax agreements.

The Danish government has also created tax breaks for companies operating in industries like pharmaceuticals, IT, agriculture, transportation, energy and environment, and life sciences. These tax breaks can be a viable option for business owners in these fields.

Companies can also reduce the taxes they pay in Denmark through the foreign tax credit. This allows local companies to be reimbursed for taxes paid on foreign-sourced income. This method usually applies to subsidiaries of Danish companies in other countries.

Using incentives and exemptions for tax optimization in Denmark

If you're looking to minimize your taxes in Denmark, one way to do this is by distributing dividends. These are not subject to taxation when issued by a local company or received by one. However, there are some exceptions to this rule which our Danish lawyers can explain to you.

Another effective tax minimization option is to take advantage of incentives related to intellectual property rights used in research and development activities.