Fiscal VAT representation in Denmark

Fiscal VAT representation in Denmark

If your company operates outside of the EU but conducts sales of goods or services in Denmark, it is mandatory to designate a fiscal representative. This representative will oversee your VAT matters in Denmark and will assume shared responsibility for Danish VAT obligations.

The necessity of having a fiscal representative depends on the geographical location of your company.

In cases where a company is obliged to register for VAT in another country due to its business activities, appointing a local tax representative may become necessary.

Typically, the fiscal representative will hold joint and several liability for the VAT liabilities of the business. Several European countries mandate the appointment of a local representative to represent non-EU companies with VAT registration obligations.

What is fiscal representation?

Fiscal representation is a service where one company acts on behalf of another that wishes to import its products into the European Union. Through fiscal representation, we can assist your company in establishing a competitive presence within the European Union.

Value Added Tax (VAT) is a specific tax applied within the European Union. EU regulations mandate that companies must have a designated presence within the EU to handle VAT procedures at customs.

Fiscal representation involves managing VAT returns and remitting the required VAT amounts to the authorities, as well as submitting necessary Intrastat European Sales statements when applicable.

There are two main types of fiscal representation: General and Limited.

Limited fiscal representation facilitates the import of goods into the EU without immediate payment of import VAT, providing a notable liquidity advantage. A fiscal representation with limited authorization is restricted to acting on behalf of a non-resident company solely for importing goods and enjoying subsequent benefits from these goods. Through Limited Fiscal Representation, we can serve as fiscal agents for companies involved in importing goods into the EU.

The scope of a Limited Fiscal Representative’s authority is restricted to representing a non-resident company solely for the importation of goods without payment of VAT and the subsequent delivery of these goods. This type of representation is beneficial for various activities ranging from sea freight to airfreight. Moreover, a Limited Fiscal Representation entails a single license that allows for the easy addition of new customers to the existing license.

Benefits of Fiscal Representation

Fiscal representation offers more advantages beyond simply registering a foreign supplier. This primarily involves alleviating the burden of VAT handling during imports and reducing administrative expenses for the foreign supplier. The fiscal representative serves as a proxy for the foreign supplier, guaranteeing the preservation of their rights and obligations. Additionally, the representative takes on responsibility and partial liability for VAT associated with the movement of goods. Engaging a fiscal representative can result in reduced costs and quicker delivery to European customers, along with numerous other advantages.

Main advantages of fiscal representation are:

  1. Alleviating the burden of handling VAT during imports and reductions
  2. Fiscal representative acts on behalf of the foreign supplier
  3. The representative assumes responsibility and partial liability for VAT
  4. Can result in reduced costs and quicker delivery to European customers

Even as a foreign company, you can utilize the reverse-charge mechanism for imports by appointing a tax representative. However, the foreign company remains accountable for its own tax responsibilities. By designating a fiscal tax representative, you can hold them responsible for meeting these obligations on your behalf.

When is VAT Registration Required in Denmark?

Due to the harmonization of VAT regulations within the European Union, the VAT registration criteria in Denmark closely resemble those of other member states. Registration for VAT in Denmark is necessary under the following circumstances:

  • Importing goods through Denmark to other EU countries.
  • Engaging in sales and purchases of goods within Denmark, or sales from Denmark to other countries.
  • Providing services subject to VAT.
  • Storing goods in Denmark.
  • Organizing live events.
  • Receiving services on a reverse charge basis, when the company is not VAT registered.

Additionally, VAT registration in Denmark is compulsory for foreign companies conducting Business-to-Consumer (B2C) transactions that surpass the intra-Community sales threshold and do not account for VAT under the VAT One-Stop Shop (OSS) scheme.

Foreign entrepreneurs can complete the VAT registration process in Denmark by filling out a form on virk.dk. Upon successful registration, entrepreneurs will receive a Danish VAT number, known as a DK-nummer, at the specified mailing address. If a business operates outside Denmark and offers taxable goods or services within the country, it might be necessary to acquire a non-resident VAT registration. This requirement aligns with the EU VAT directive, which mandates that foreign businesses register for VAT under specific circumstances to report taxable transactions and declare the applicable VAT charges.

Who is Not Obligated to Register for VAT in Denmark?

Businesses with revenue in the preceding 12 months below DKK 50,000 are not required to register for VAT in Denmark, although they have the option to do so.

Conversely, if the revenue exceeds DKK 50,000 and the company is not already VAT registered, it must register at the earliest opportunity. Furthermore, businesses anticipating such revenue should register for VAT no later than 8 days prior to commencing their operations.

Designating a Tax Representative

A foreign company engaging in transactions in Denmark that are subject to Danish VAT might need to designate a tax representative. Fiscal representative is located in Denmark and will handle the company’s VAT responsibilities with the Danish tax authorities on its behalf. This includes filing VAT returns, remitting VAT payments, seeking VAT refunds, and conducting tax audits.

Appointing a tax representative is a mandatory requirement. This obligation extends to all companies located outside the European Union involved in transactions subject to taxation in Denmark, including:

  • Importing goods from countries outside the EU to Denmark
  • Exporting goods from Denmark to countries outside the EU
  • Purchasing goods supplied in Denmark from EU member states
  • Business-to-Business (B2B) supplies of goods from Denmark to EU member states
  • Business-to-Consumer (B2C) supplies of goods and services to Danish individuals, including those conducted via Marketplaces

Not designating a tax agent incurs severe penalties from the Danish tax authority and renders companies ineligible for VAT refunds

Furthermore, it’s important to recognize that European partners (providers, suppliers, customers, marketplaces, etc.) consistently decline to engage with non-European companies that have not appointed a tax representative, considering it too risky for their operations.

Why is it worth it to choose a tax representative?

Non-European companies are unable to directly register for VAT in Denmark. Instead, they must go through a VAT representative. This representative, typically a local company, acts on your behalf with the local VAT authorities. They are accountable for ensuring compliance with all your VAT obligations, even those they were unaware of. Consequently, they may request a deposit (e.g., a bank guarantee) from you before agreeing to represent you.

Apart from fulfilling the legal requirement, tax representation serves as a straightforward and cost-effective alternative to establishing a physical presence through the creation of a branch or subsidiary.

Indeed, tax representation enables foreign companies to access the Danish market without incurring the expenses and complexities associated with physical establishment, which entails establishing a corporate structure and managing separate accounting procedures.

Specifically, a foreign company that has appointed a tax representative in Denmark will not be subject to corporate tax in Denmark.

The entire operation is managed remotely from abroad through the tax representative, who takes care of all VAT-related obligations mandated by the Danish tax authorities:

  • obtaining a VAT number,
  • filing periodic declarations and VAT payments,
  • submitting requests for VAT refunds, and so forth.

European companies are not required to designate a VAT representative. Nonetheless, they may choose to appoint an agent to handle tax formalities with the local tax authorities on their behalf, thus simplifying their interactions. In such instances, there is no need to provide a bank guarantee. However, the company retains full responsibility for settling its VAT obligations.

What kind of services are covered under fiscal representation?

Fiscal representation services include:

  1. Guaranteeing 'VAT Compliance’ with domestic fiscal regulations
  2. Ensuring adherence to local regulations concerning invoicing, VAT handling, accounting protocols, and VAT reporting and payments
  3. Managing inquiries and tax audits conducted by the local VAT authorities.

Delegating VAT responsibilities in Denmark to a tax representative

Delegating VAT responsibilities to a fiscal representative in Denmark is essential to safeguard your operations, reduce your company’s administrative workload, and manage tax risks effectively in Denmark. The regulations governing Intra-Community and Danish VAT are intricate and undergo frequent revisions. Declaration requirements are recurrent and vary in frequency. Penalties for non-compliance or delays, as well as inaccuracies in cash flow assessment, can swiftly become financially burdensome.

Avoid taking unnecessary risks and experiencing unnecessary stress: entrust the management of your VAT obligations to experts.

Which Companies Require Fiscal Representation in Denmark?

Companies based in the EU, as well as Norway, Greenland, the Faroe Islands, and Iceland, have the option to register directly with the relevant local VAT authorities. They are not obligated to engage a local fiscal representative, but non-resident companies may choose to delegate the time-consuming and occasionally complex task to a local representative. We will provide an address for the relevant company at our location, handle all paperwork in Danish, and manage all communication with local authorities. It’s worth noting that the cost of this service is lower for EU-based companies, as they will not be subject to joint liability.

Companies situated outside the EU must appoint a fiscal representative in Denmark. As the representative shares joint liability with the non-resident company, the client may be required to establish a bank guarantee or security deposit in favor of the representative.

It is crucial for all companies operating in Denmark to evaluate their compliance obligations and register accordingly before commencing any taxable transactions, if necessary.

Any company engaging in taxable transactions in Denmark must register as a VAT payer in the country, report taxable transactions, and remit VAT. Companies within the European Union have the option to manage these procedures independently or through a tax agent. However, companies located outside the European Union must utilize a tax representative to fulfill administrative obligations.