Company settlement in Denmark

Annual accounting for companies in Denmark

If you are a business owner in Denmark, you are obliged to submit your annual tax return to SKAT, the Danish tax authority. As a Danish entrepreneur, you can settle your annual return electronically, via the website www.skat.dk, with help of previously ordered special code NemID or Tastselv. You will also need a CPR (Personnummer) from the Danish Customs and Tax Administration to settle income tax and VAT for Danish companies.

What is worth knowing about the annual settlement by Danish companies?

1. If you are self-employed in Denmark, you have unlimited tax liability and the right to a personal tax allowance – Personfradrag, the amount of which is set annually.
2. As a Danish entrepreneur, you can also benefit from other tax reliefs and include them in your annual tax return, such as: relief for the cost of renting a flat in Denmark (you need to provide a rental agreement), relief for utilities in a rented flat (you need to provide receipts or bank transfers), relief for travel expenses (e.g. to another country, you need to provide bus tickets, plane tickets, ferry tickets, motorway tolls, etc.).
3. Every entrepreneur is entitled to receive a special tax return form from SKAT – Selvangivelse – which is sent to the address provided by the taxpayer when registering.
4. Those who are self-employed in Denmark must settle their tax return with the Danish tax authorities by 1 July.
5. After 2 July, SKAT (Skattestyrelsen) issues and sends a document – Årsopgørelse – to the Danish entrepreneur, which contains the tax decision, i.e. the amount of the refund (Skat til udbetaling, marked on green) or surcharge (Restskat til betaling, marked on red).
6. If you want to check your settlement, click on the formula Se årsopgørelsen on your individual SKAT account page. If you want to make an adjustment and take into account allowances that Danish employer may be entitled to, you need to click on the Ret årsopgørelsen/oplysningsskemaet formula.
7. The tax refund is paid to the NemKonto previously established by the Danish entrepreneur.
8. Personlig indkomst means personal income after deduction of ATP and relief for pension contributions.
9. Kapitalindkomst means capital income, i.e. interest income (e.g. from bonds, investments or deposits) after deducting the interest expenses occurring with loans.
10. Capital income (kapitalindkomst) and the deduction from capital income (fradrag and kapitalindkomst) appear on the annual tax return sent by SKAT.
11. The term Renteindtægter means interest income and Renteudgifter means interest expense.
12. In Denmark, companies can settle the tax, make a correction to the tax return or appeal the decision from SKAT, up to three years
13. Danish entrepreneurs can deduct insurance premiums, child support, pension contributions, transport to work and food costs from their taxes, but the Danish tax authorities have the right to check, within seven years, whether these expenses are correct.
14. Danish companies are entitled to use the reverse-charge procedure, which means that foreign companies that want to sell goods and services to Danish companies do not have to charge Danish VAT. In that case, no tax is charged on the invoice, only the net value of the goods or services is entered, and a ready-made formula is used, e.g. Reversed charge, which means that the purchaser should charge and pay VAT on the service and enter the CVR or SE-nummer (the purchaser’s registration number).
15. A fixed VAT of 25 per cent is payable by all companies selling services or goods in Denmark. This is a value-added tax added to the price of the services or goods that are sold by the company, and companies must also account for this tax in their annual tax return.
16. Danish business owners must register their business as a VAT payer before starting to provide services and goods (they have eight days to do so).
17. All Danish companies with an annual turnover of more than DKK 50,000 are subject to VAT. They must then be declared as a VAT payer via the RUT website, the Register of Foreign Suppliers (virk.dk).
18. If the Danish taxpayer’s annual income does not exceed DKK 42,900, they will receive a full tax refund.
19. A Danish entrepreneur cannot pay in Denmark more tax than 51.5 per cent for the previous financial year.
20. Entrepreneurs who have decided to conduct their own business in Denmark or stay in Denmark for an uninterrupted period of more than six months have a full tax liability, i.e. they must submit an annual tax return to the Danish tax authorities, taking into account all income, both from Denmark and from abroad, taking into account the double taxation agreement.
21. In the event that you have received compensation, you must report diverse information concerning the period during which you received compensation. This reporting is necessary to facilitate the Danish Business Authority in conducting the final settlement.
22. If you attach a tax exemption certificate to your claim form, The Danish Labour Market Fund for Posted Workers will refrain from deducting tax from your pay. Instead, the Danish Labour Market Fund for Posted Workers will inform the Danish Tax Agency that you are exempt from Danish tax, and you will then become tax liable in your home country. To appeal a decision made by The Danish Labour Market Fund for Posted Workers, your appeal must reach the Appeals Board for ATP within four weeks from the day you received the letter containing the decision. The processing time for your request may be extended if any information or documentation is missing.
23. The Danish Labour Market Fund for Posted Workers will ensure that you as a posted worker can recover unpaid wages if your employer does not pay you what you are owed. In addition to your wages, you can, for example, recover holiday pay and pension.
24. The leading parent company within the Danish tax consolidation group will assume the designation of a 'management company.’ This entity is tasked with handling tax on account and final corporate tax payments for all members within the group.
25. The labor law system in Denmark is predominantly built upon Collective Bargaining Agreements (CBAs). These agreements are typically negotiated between a trade union and an employer’s association, serving as the framework for regulating salaries and working conditions within a specific sector.
26. The employer is obligated to cover two-thirds of the contribution to the labor market supplementary pension fund (ATP contribution), while the employee is responsible for paying one-third of the ATP contribution and labor market contributions (8%).
27. Euronext Securities Copenhagen (ES-CPH) is responsible for settling Danish securities transactions. In Denmark, professional participants’ mutual securities transactions are settled in the European securities settlement system, T2S, while transactions involving private investors are settled through ES-CPH’s proprietary settlement system (ES-CPH settlement system). Participants using either settlement system are required to maintain a custody account at ES-CPH.
28. Under the Act on Part-Time Work, as per Consolidated Act No. 1142 of 14 September 2018, part-time workers are entitled to the same rights and benefits as those granted to full-time employees, unless the employer can provide justification that any different treatment is grounded in objective reasons.
29. The Sumclearing, Intradagclearing, and Straksclearing systems feature a dual participant structure, encompassing both direct and indirect participants.
30. If over one-third of the subsidiary’s taxable profits, as hypothetically assessed under Danish tax laws, are predefined Controlled Foreign Company (CFC) income types (primarily interest, royalty, capital gains, etc.), specific tax considerations and regulations may come into play.

Type of annual accounts in Denmark

In Denmark, the type of company’s annual tax settlement with SKAT depends on the entrepreneur’s choice of business type.

It is worth considering which form of Danish business, and thus which form of taxation and annual settlement with the Danish Tax Authority, will suit our expectations and possibilities.

In Denmark, we distinguish between the following company tax returns:

1. Annual tax return for a sole proprietorship(Enkeltmandsvirksmhed);
2. Annual tax return for a limited liability company (Aktieselskab – A/S);
3. Annual tax return for a general partnership (Interesselskab – I/S);
4. Annual tax return for a limited liability company(Anpartsselskab – ApS);
5. Annual tax return of a limited partnership (Kommanditselskab – K/S);
6. Annual tax return of a branch of a foreign company (Filial af udenlandsk selskab);
7. Annual tax return of a representative office of a foreign company (Salgskontor);
8. Annual tax return of a cooperative association (Andelsforening/Brugsforening);
9. The annual tax return of a limited liability company (from 1 January 2014 Iværksætterselskab – IVS).

Danish business owners are required to submit their tax return for the previous tax year by 1 July.

Annual return for a sole proprietorship in Denmark

Skattestyrelsen (SKAT), treats income from self-employment (Enkeltmandsvirksmhed) as income for the business owner, so business tax is declared on a single tax return and the business owner, who pays taxes and social security contributions, is entitled to pension and health benefits like those for employed persons in Denmark. Once every six months or quarter, a tax return (income tax and VAT) must be submitted via the SKAT website.

An entrepreneur with a sole proprietorship in Denmark should submit his tax return for the previous tax year by 1 July. If he settles his tax through the SKAT website, he will automatically receive feedback on the tax decision.

What else needs to be known about the annual tax return for self-employment in Denmark?

1. A Danish entrepreneur who wants to settle his tax online should order in advance a special code – the TastSelv-kode (tastselv.skat.dk), consisting of eight digits, which is also the password to the system. The individual TastSelv-kode (or NemID)provides access to private tax information.
2. The owner of a Danish company should receive from SKAT a document called Selvangivelse, which is a tax return form, and after 2 July a tax decision, Årsopgørelse.
3. In Denmark, entrepreneurs can write off costs such as:
   • expenses related to the purchase of goods for sale;
   • expenses for company insurance;
   • expenses related to renting premises;
   • network expenses;
   • telephone costs;
   • expenditure on the company car;
   • costs of maintenance and repairs to company premises;
   • heating costs;
   • electricity expenses;
   • expenditure on machinery, equipment and plant (if the expenditure cannot be deducted from tax at the time of purchase, any costs must be entered in depreciation);
   • costs related to inventory;
   • expenses for an auditor;
   • solicitor’s expenses;
   • any plant, machinery, goods and equipment that are for private use, even though purchased for the company, cannot be deducted from the company’s annual tax return;
   • all company documentation related to allowances that have been included in the annual Danish business tax return should be retained by entrepreneurs for five years;
   • in Denmark, the tax return must be submitted via the website up to six months after the end of the tax year (calendar year or other, but 12 months). If the tax year ends between 1 February and 31 March, the tax return should be submitted by 1 August and the tax must be paid on 20 March and 20 November.

Danish sole proprietors should choose one of 3 options for taxing their business:

• taxation according to the Share Capital Act (Kapitalafkastordning), which implies that part of the company’s profit can be transferred to personal income and part to capital income;
• taxation of the profit as personal income, i.e. the same as for employed persons;
• taxation in accordance with the Companies Act (Virksomhedsordning), which implies that costs from credit interest can be written off, but you can also keep the profit from the company in the form of bank savings, which will also be an advantage.

Annual accounting for companies in Denmark

Danish entrepreneurs who choose to establish and operate companies in Denmark are required to pay corporation tax – 22 per cent CIT. Danish company’s annual turnover cannot exceed DKK 50,000, or else it becomes liable for 25 per cent VAT.

Important information on the annual tax return of Danish companies:

1. The annual tax return of a general partnership (Interesselskab – I/S) depends on the form of taxation of its company previously chosen by the owner. A Danish entrepreneur running a general partnership should choose one of the 3 taxation options (as in the case of a sole proprietorship – Enkeltmandsvirksmhed):
   • taxation according to the Share Capital Act (Kapitalafkastordning), which assumes that part of the company’s profit can be transferred to personal income and part to capital income;
   • taxation of the profit as personal income, as for employed persons;
   • taxation in accordance with the Companies Act (Virksomhedsordning), which assumes that costs from credit interest can be written off, but the profit from the company can also be retained in the form of bank savings, which will also be an advantage;
2. The annual tax settlement of a limited liability company (Anpartsselskab – ApS), like that of a joint-stock company (Aktieselskab – A/S), is related to the taxation of the Danish company, which, as a physical entity, does not require that its owners to be liable for the company’s obligations with their own assets, but only with a share in the company’s capital. The company’s shareholders settle the taxation of their income or dividends with the Danish tax authorities.
3. The annual tax settlement of a limited liability company (Iværksætterselskab – IVS) is related to its taxation according to the Companies Act, to which the owners of IVS are not subject, due to the fact that the company is a physical entity. Iværksætterselskab must prepare open annual accounts.

The company owners submit a tax return each year by 1 July. From SKAT, they receive a Selvangivelse tax return form, which they must complete, taking into account any allowances to which they are entitled, and submit via www.skat.dk. Owners of Danish companies are required to prepare open financial statements every year.

Documents needed for the annual accounting of Danish companies

If you are the owner of a Danish company you are obliged to submit an annual tax return to Danish Customs and Taxation, and if you have employees, you must also ensure that they get all the necessary documents they need for their annual tax return.

Deadlines for annual company accounts in Denmark

Danish entrepreneurs (and Danish tax non-residents from another eu countries) who carry out their own business activities in Denmark must settle with the Danish tax authorities by 1 July (due to the pandemic, different rules apply and the deadline for filing the Danish tax return for 2019 has been extended to 20 September 2020). If you have not yet applied for a new residency document but meet the terms and conditions outlined in the Withdrawal Agreement (having been lawfully resident in Denmark before January 1, 2021), it is imperative to submit your application before 31 December 2023. Upon registering your residence in Denmark and obtaining a Central Person Register (CPR) number, it is advisable to apply for an income tax card (Skattekort).

On 31 December 2021, Bill L 28 was enacted, applicable to income years commencing on 1 January 2021, or thereafter. This legislation mandates that companies must submit their transfer pricing documentation within 60 days following the deadline for filing the tax return, with the initial deadline set for June 30.

After 2 July, SKAT (Skattestyrelsen) issues and sends to the Danish taxpayer a document – Årsopgørelse – which contains the tax decision, i.e. the amount of the refund(Skat til udbetaling, marked in green) or surcharge (Restskat til betaling, marked in red).

In Denmark, business owners can settle the tax, make a correction to the tax return or appeal the decision from SKAT, up to three years and four months back.

A Danish entrepreneur has the right to take advantage of tax allowances, but the Danish tax authorities have five years to check whether the allowances included in the tax return are correct, so Danish company owners must keep all documentation proving the accrued expenses for this period.

FAQ

1. By when do I have to settle my tax return with the Danish tax authorities?

   The tax return for the previous tax year must be submitted by 1 May (employed persons and Danish residents) or 1 July (Danish entrepreneurs). The date is set by SKAT and placed on the Selvangivelse tax form, which it sends to the taxpayer. The penalty for not filing a tax return can be DKK 5,000. The Danish taxpayer has three years and four months to correct the return for the tax year in question.

2. How can I order a Tastselv?

   To order a Tastselv code, log on to www.skat.dk and then select:

   • Log på;
   • Bestil kode;
   • TastSelv kode;
   • enter CPR with a dash in the blank field;
   • access password via SMS, e-mail or letter;
   • once you have received the code, log on to skat.dk via Log på med TastSelv kode;
   • enter the CPR and wait for the code;
   • enter your new password (8 to 16 characters), repeat the password and click FORTSÆT;
   • after these steps, we are logged in with the TastSelv code.
3. Where can I report a change of address for official correspondence?

   You can update your address for official correspondence at Borgerservice.

4. What websites are worth knowing about as an entrepreneur in Denmark?
   • About the website of the Danish Customs and Tax Administration – Skattestyrelsen, skat.dk;
   • about the website of the Danish Aliens’ Board – Udlændingestyrelsen, nyidanmark.dk;
   • about the website of the information service for foreigners – International Citizen Service, icitizen.dk;
   • about the website of the Danish Ministry of Employment – Beskæftigelsesministeriet, workindenmark.dk;
   • about website of Borger.dk, lifeindenmark.dk.
5. What terms can I find on my annual tax return?
   • Bundskat – bottom tax (8%);
   • Topskat – top tax attempt (15%);
   • Skrå skatteloft – top tax to the municipality and to the state, which does not include the Labour Fund contribution and church tax;
   • Personlig indkomst – personal income from work, which takes into account allowances such as benefits, pension contributions or contributions to the Labour Fund;
   • Skattepligtig indkomst – personal and capital income after deducting deductible expenses, which is taxable income;
   • Ligningsmæssige fradrag – relief from municipal and health tax;
   • Kapitalindkomst – capital income, i.e. interest income after deducting interest expenses;
   • Fradrag – relief deducted from income;
   • Kommuneskat – municipality (municipal) tax;
   • AM-bidrag, which is an 8 per cent contribution to the Labour Fund;
   • Lønindkomst (inkl. fri bil/telefon), i.e. income from work (including company car/phone);
   • Eget pensionsbidrag, i.e. own part of the pension contribution (5%);
   • Personalegoder, i.e. employee allowances such as health insurance;
   • Renteindtægter, i.e. interest income;
   • Renteudgifter, i.e. interest expense;
   • Beskæftigelsesfradrag, i.e. labour relief;
   • Befordringsfradrag, i.e. relief for travel;
   • Håndværkerfradrag, or craftsmen’s relief;
   • Skattepligtig indkomst, or taxable income;
   • Skatteberegning, or tax assessment;
   • Ejendomsværdiskat, or property tax;
   • Personfradrag bundskat, i.e. bottom tax free amount;
   • Personfradrag kommuneskat, i.e. municipality tax free amount;
   • Beregnet skat – accrued tax.
6. What are the income tax percentage rates in Denmark for 2019?
   • 8% for income below DKK 50,217,
   • 39.2% for income between DKK 50,217 and DKK 558,043,
   • 56.5% for income higher than DKK 558,043.
7. How much is the car tax in Denmark?

   In Denmark, the so-called luxury tax is up to 180% of the net price of the car purchased.

8. What does begrænset skattepligt mean?

   Begrænset skattepligt means limited tax liability.

9. What does sundhedsbidrag mean?

   Sundhedsbidrag means health insurance contributions.

10. By when in Denmark must companies file their annual tax return?

    Danish businesses should submit their annual tax return for the previous tax year to SKAT by 1 July.