Danish company settlement
Annual summary of business operations in Denmark
If you are the owner of a company in Denmark, you are required to file an annual tax return with SKAT, the Danish tax authority in question. If you do business in Denmark, as a Danish entrepreneur, you have the option of completing your annual returns electronically. This is done through the official website www.skat.dk, using a pre-ordered special code known as NemID or Tastselv. For income tax and VAT settlements, Danish companies must also have a CPR (Personnummer) number, assigned by Customs and Taxation.
What is worth knowing about annual settlements for companies in Denmark?
- If you run your own business in Denmark, you are undoubtedly headed for an unlimited tax liability, as well as the right to an individual tax credit - Personfradrag, the value of which is determined annually.
- A Danish entrepreneur also has the opportunity to take advantage of other tax benefits and include them in the annual tax returns. These include, but are not limited to, relief for renting an apartment in Denmark (rental agreement required), relief for utilities in a rented apartment (receipts or transfer receipts must be provided), and relief related to travel expenses (e.g., to the country of origin, with this and coach, air and sea tickets, highway gate fees, etc.).
- From SKAT, each entrepreneur receives a special form - Selvangivelse - for the tax return, sent to the address entered by the taxpayer in question during registration.
- Persons doing business in Denmark are required to make a settlement with the Danish tax authorities before July 1.
- After July 2, SKAT (Skattestyrelsen) issues and sends to the Danish entrepreneur a document - Årsopgørelse - containing the tax decision, i.e. the amount to be refunded (Skat til udbetaling, in green) or surcharged (Restskat til betaling, in red).
- To check your personal settlement, it is necessary to go to your individual SKAT account and click on the formula Se årsopgørelsen. To make a correction and take into account Danish entrepreneurs' allowances, click the Ret årsopgørelsen/oplysningsskemaet formula.
- The tax refund is deposited into a previously established NemKonto account by the Danish entrepreneur.
- The term Personlig indkomst means individual income after deduction of ATP pension contributions and allowances for pension insurance.
- The term Kapitalindkomst means income from capitals, i.e., interest income (e.g., from bonds, investments or deposits) after deducting interest expenses associated with loans.
- Capital income (kapitalindkomst) and deductions from capital income (fradrag and kapitalindkomst) are shown on the annual tax return sent by SKAT.
- Renteindtægter means interest benefits, while Renteudgifter means interest expenses.
- In Denmark, companies can make tax settlements, apply adjustments to tax returns or also appeal SKAT's decision within 3 years.
- A Danish entrepreneur has the right to deduct insurance premiums, child support, pension contributions, commuting expenses and food expenses from tax. However, the Danish tax authority has the ability to check within 7 years whether the expenses described are true.
- Danish companies are entitled to use the reverse taxation procedure, which means that foreign companies wishing to sell goods and services to Danish companies do not have to charge Danish VAT. In this situation, tax is not included in the invoice, only the net value of the goods or services. A ready-made formula should be used, such as Reversed charge, which means that the purchaser should charge and pay VAT on the service and provide the CVR or SE number (purchaser's registration number).
- All companies offering goods or services in Denmark are required to pay a fixed 25 percent VAT. This is a value-added tax applied to the price of services and goods offered by the company, and taxpayers must account for it in their annual tax returns as well.
- Danish business owners must register their business as VAT taxpayers before providing services and goods (they have 8 days to do so).
- The VAT premise includes all Danish companies with an annual turnover of more than DKK 50,000. They are then required to declare themselves as VAT payers through the RUT platform, means Register of Foreign Suppliers (virk.dk).
- If a taxpayer's annual income from Denmark does not exceed 42,900 Danish kroner, they are entitled to a full tax refund.
- A Danish entrepreneur is not able to pay more tax than 51.5% for the previous tax year.
- Persons operating in Denmark with their own business interests are required to file an annual tax return with the Danish tax authorities. They take into account all income, both domestic and foreign, in accordance with the double taxation treaty.
Options for annual returns in Denmark
The way in which companies file their annual tax returns with SKAT depends on the entrepreneur's choice of business type.
There are differences in taxation between figures such as sole proprietorships in Denmark, as well as limited liability companies, joint stock companies, limited partnerships or general partnerships. It is worth considering which form of business in Denmark, and as a result, which model of taxation and annual settlement with the Danish Tax Authority, will be most compatible with our expectations and available resources.
In Denmark, the following types of business tax returns can be distinguished:
- Annual tax return Enkeltmandsvirksomhed - for a sole proprietorship.
- Annual tax return Aktieselskab - A/S - for joint stock companies.
- Annual tax return Interesselskab - I/S - for general partnerships.
- Annual tax return Anpartsselskab - ApS - for limited liability companies.
- Annual tax return Kommanditselskab - K/S - for limited partnerships.
- Annual tax return Filial af udenlandsk selskab - for branches of foreign companies.
- Salgskontor annual tax return - for representative offices of foreign companies.
- Andelsforening/Brugsforening annual tax return - for cooperative associations.
- Annual tax return Iværksætterselskab - IVS - for limited liability companies (as of January 1, 2014).
Danish business owners are required to file a tax return for the previous tax year by July 1.
Annual declaration of a sole proprietorship in Denmark
In Denmark, the tax authority, Skattestyrelsen (SKAT), treats income earned in the course of running a self-employed business (Enkeltmandsvirksmhed) as income of the business owner. Accordingly, business taxation is reported via a single return. The business owner, who pays taxes and contributions, is also entitled to health and pension benefits, just like regular Danish employees. Every six months or quarter, immediately through the SKAT online platform, it is mandatory to provide a tax return, including both income tax and VAT.
For income tax, advances are made on two dates: March 20 (by placing a higher advance payment, you can receive a tax refund with interest, which is higher than in the bank) and November 20 (on this date, the interest rate is reduced by 0.4 - this means that the interest is lower than in the bank). For a sole proprietor in Denmark, an important deadline is to file the tax return for the previous tax year by July 1. When using the SKAT website to file a tax return, the entrepreneur automatically receives feedback on the tax decision.
What more do you need to know about the annual tax return process for self-employment in Denmark?
- A Danish entrepreneur who plans to do their tax return online should order in advance a special code known as TastSelv-kode (available at tastselv.skat.dk), consisting of 8 digits. This individual TastSelv-kode (or NemID) provides access to private tax information.
- The owner of a business in Denmark receives a document from SKAT titled Selvangivelse, which is a tax return form, and after July 2 receives a tax decision - Årsopgørelse.
- In the context of the country, Denmark, entrepreneurs are allowed to deduct certain costs from tax, such as:
- expenses related to the purchase of goods for sale,
- expenses for insurance policies for the company,
- expenses for renting premises,
- computer network costs,
- expenses for telephones,
- costs related to the company car,
- costs of maintenance and repair of office premises,
- heating costs,
- electricity expenses,
- costs for the purchase of machinery, equipment and appliances (if the costs were not deducted at the time of purchase, they can be entered as depreciation expenses),
- costs related to inventory,
- expenses for auditing services,
- costs of lawyers,
- equipment, machinery, goods and devices that are used privately, even if they were purchased for the company, cannot be deducted on the company's annual return,
- documentation related to the use of deductions that were included in the Danish company's annual return should be kept for five years.
Filing of the Danish tax return is done through an online platform within 6 months of the end of the tax year (whether calendar or other, with 12 months). If the tax year ends between February 1 and March 31, the tax return must be filed by August 1, and tax paid on March 20 and November 20.
Owners of sole proprietorships in Denmark must choose between three available taxation options for their business:
- taxation according to the provisions of the Share Capital Act (Kapitalafkastordning), which allows part of the company's profit to be transferred to personal income and part to capital income,
- taxation of profit as personal income, as in the case of employees,
- taxation according to the provisions of the Enterprise Act (Virksomhedsordning), which allows costs related to loan interest to be deducted from tax, and the company's profit to be retained as bank savings, which is a favorable solution.
Annual settlement of company finances in Denmark
The main obligation for Danish entrepreneurs who choose to create and operate companies in Denmark is to pay corporate tax of 22%. If a company's annual turnover exceeds DKK 50,000, then the company becomes liable for VAT at 25%.
For each company in Denmark, there is an obligation to settle income tax, covering total income, including income from real estate and capital. This process should be completed within six months of the end of the tax year.
Details important for the annual settlement of companies in Denmark:
- The annual tax liability of a general partnership (Interesselskab - I/S) is largely dependent on the form of taxation previously chosen by the owner. A person operating a general partnership should choose from three options:
- The option to be taxed according to the provisions of the return of capital (Kapitalafkastordning), which allows part of the profit to be transferred to personal income and part to capital income.
- The option to tax the profit as personal income, as in the case of employed persons.
- The option of taxation according to business regulations (Virksomhedsordning), which allows for the deduction of loan interest expenses and the retention of business profit as bank savings.
- The annual taxation of limited liability companies (Anpartsselskab - ApS) and joint-stock companies (Aktieselskab - A/S) relates to the taxation of those companies that, as individuals, have no personal liability for the company's obligations, but a share in the capital. Shareholders of such companies are taxed on their income or dividends.
- Limited liability companies (Iværksætterselskab - IVS) are taxed according to company regulations, but IVS owners are not required to be taxed under the same rules, as the company is a physical entity. An IVS company must submit annual financial statements.
Company owners in Denmark are required to file a tax return by July 1. They receive a Selvangivelse form from SKAT, which they fill out, taking into account any allowances they are entitled to, and then submit it via www.skat.dk. Danish company owners are also required to submit open financial statements.
A company's open financial statements in Denmark should include:
- summary of the company's business management,
- annual balance sheet,
- profit and loss account,
- statement of changes in equity,
- additional information.
Annual tax settlement periods for companies in Denmark
By the deadline of July 1, those running their own business in Denmark (including non-tax residents) are obliged to settle their tax obligations to the Danish state. Due to the current pandemic situation, the deadline for filing the 2019 tax return has been postponed until September 20, 2020.
The period from March 1 to May 1 is the time when those with limited tax liability and tax residents in Denmark should complete their settlement obligation. If you wish to take advantage of the Cross Border Tax Credit and need to be jointly taxed with your spouse for the previous tax year, the time limit for settling these issues is June 1.
After July 2, the tax authority SKAT (Skattestyrelsen) generates and sends to the country's citizens the document Årsopgørelse, which contains the official fiscal decision. This decision determines whether the taxpayer is entitled to a refund (Skat til udbetaling, shown in green) or has a surcharge obligation (Restskat til betaling, shown in red).
Business owners in Denmark have the option to correct their tax return, make an adjustment, or appeal a decision made by SKAT, keeping this privileged period up to 3 years and 4 months back.
Danish entrepreneurs are entitled to tax benefits, but the state fiscal has a five-year period to verify the accuracy of the information contained in the return. For this reason, Danish company owners are required to keep complete documents proving any expenses incurred during this designated period.
Documents needed for Danish companies' annual tax return
If you own a business in Denmark, you are required to file an annual tax return with Danish Customs and Taxation. If you have employees, you must also provide them with all the necessary documents to properly file the tax return.
Important documents related to the annual company tax return in Denmark are:
- Arspogorelse, is the official document sent by SKAT after July 2, containing information about the tax decision (refund or surcharge).
- Oplysningsseddel, is the equivalent of the Polish PIT-11, showing a cross-section of an employee's earnings. At the end of the year, every employer in Denmark is required to provide such a document to employees.
- Selvangivelse, is a tax return form, delivered by the Danish Tax Authority (SKAT) to the address provided during registration, whether it is a Danish or Polish address.
- Lonseddel, is the regular weekly or monthly pay stubs an employee receives. Every employer in Denmark is required to provide such documents to its employees.
- What are the deadlines associated with filing a tax return with the Danish Tax Authority?
Taxpayers who work or are Danish residents must file their tax return for the past tax year before May 1. Danish entrepreneurs, on the other hand, have until July 1. This deadline is determined by SKAT and appears on the Selvangivelse form that is given to the taxpayer. If the declaration is not filed, there is the possibility of a fine of 5,000 Danish kroner. A person paying taxes in Denmark has a period of 3 years and 4 months to correct the return for the tax year.
- How can I get the Tastselv code?
To get the Tastselv code, follow these steps:
- Go to www.skat.dk.
- Click the "Log på" option.
- Then select "Bestil kode."
- Next, select "TastSelv kode."
- In the blank field, enter the CPR number along with a dash.
- Select the preferred way to receive your access password: SMS, e-mail or mail.
- After receiving the code, log in to skat.dk via the "Log på med TastSelv kode" option.
- Enter your CPR number and wait for the code.
- Set a new password, which should be between 8 and 16 characters. Repeat the password and click "FORTSÆT".
- After these steps you will be logged in with the TastSelv code.
- How do I report a change in my mailing address for the office?
You can update your mailing address for the office at Borgerservice.
- Which websites are useful for entrepreneurs in Denmark?
You should be familiar with the following websites while being an entrepreneur in Denmark:
- Danish Customs and Taxation website - Skattestyrelsen, skat.dk.
- Site of the Danish Aliens Office - Udlændingestyrelsen, nyidanmark.dk.
- Site of the information service for foreigners - International Citizen Service, icitizen.dk.
- Site of the Danish Ministry of Employment - Beskæftigelsesministeriet, workindenmark.dk.
- Borger.dk website, lifeindenmark.dk.
- What terms can be found in the annual tax return?
You may encounter the following terms on your annual tax return in Denmark:
- Bundskat: Bottom tax (8%).
- Topskat: The highest tax threshold (15%).
- Skrå skatteloft: Upper tax threshold to the municipality and the state, excludes Labor Fund contribution and church tax.
- Personlig indkomst: Personal income from work, including benefits, pension contributions and Labor Fund contributions.
- Skattepligtig indkomst: Personal and capital income after deducting deductible expenses, subject to taxation.
- Ligningsmæssige fradrag: A deduction for municipal and health taxes.
- Kapitalindkomst: Capital income, interest income after deducting interest expense.
- Fradrag: Relief deducted from income.
- Kommuneskat: Municipal (municpal) tax.
- AM-bidrag: 8% contribution to the Labor Fund.
- Lønindkomst (inkl. fri bil/telephone): Income from work (including company car/phone).
- Eget pensionsbidrag: Own pension contribution (5%).
- Personalegoder: Employee allowances, such as health insurance.
- Renteindtægter: Earnings from interest.
- Renteudgifter: Interest expense.
- Beskæftigelsesfradrag: An allowance for labor.
- Befordringsfradrag: Relief for travel expenses.
- Håndværkerfradrag: Artisan relief.
- Skattepligtig indkomst: Taxable income.
- Skatteberegning: The calculation of tax.
- Ejendomsværdiskat: Property tax.
- Personfradrag bundskat: Bottom tax free amount.
- Personfradrag kommuneskat: Municipal tax free amount.
- Beregnet skat: The tax charged.
- What are the income tax rates in Denmark in 2019?
The following income tax percentages apply 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 above 558,043 DKK.
- How much is the tax on a car in Denmark?
In Denmark, there is a so-called luxury tax, which can be as high as 180% of the net price of a purchased car.
- What does "begrænset skattepligt" mean?
The term "begrænset skattepligt" refers to limited tax liability.
- What is a "sundhedsbidrag"?
"Sundhedsbidrag" is health insurance premiums.
- When must companies in Denmark file their annual tax return?
Danish businesses are required to file their annual tax return for the past year before July 1 with SKAT.