Company's tax return in Denmark

In Denmark, business owners are required to file their annual tax returns with SKAT, the country's tax authority. 

To complete your annual return, you, as an entrepreneur, can utilize the electronic services available on the website www.skat.dk. Accessing this service will require a special code, either NemID or Tastselv, which should be ordered in advance. Additionally, obtaining a CPR (Personal Identification Number) from the Danish Customs and Tax Administration is necessary for managing income tax and VAT for companies in Denmark. 

Staying informed about the deadlines and requirements for your tax return is crucial for ensuring compliance. Properly handling your annual return can help you make the most of available tax benefits.

Key insights on annual settlements for Danish companies

Important details regarding the annual settlements for companies in Denmark include several key points:

1. Self-employed individuals in Denmark are subject to unlimited tax liability and are entitled to a personal tax allowance known as Personfradrag, which is determined each year. Tax returns for those who operate independently must be filed with the Danish tax authorities by July 1st.

2. Following July 2nd, a document called Årsopgørelse is sent to Danish entrepreneurs by SKAT (Skattestyrelsen), detailing the tax assessment. This document indicates whether there is a refund due (Skat til udbetaling, highlighted in green) or an additional amount owed (Restskat til betaling, highlighted in red). Additionally, companies in Denmark have up to three years to correct their tax returns, appeal SKAT’s decisions, or settle their taxes.

3. Danish companies can take advantage of the reverse-charge mechanism, allowing foreign businesses selling goods and services to them to omit Danish VAT from their invoices. In such cases, only the net value of the goods or services is listed, and a standard phrase, such as "Reversed charge," is included. This indicates that the purchaser is responsible for accounting for and paying VAT on the service, along with entering their CVR or SE-nummer (the registration number of the purchaser).

4. Before providing goods and services, Danish business owners are required to register as VAT payers within eight days.

5. Aspecific tax return form called Selvangivelse is provided by SKAT to all entrepreneurs, and it is dispatched to the address given at the time of registration. For those who use virtual office services, the designated Danish address assigned to their business can be utilized for this purpose.

6. In Denmark, the framework of labor laws largely relies on Collective Bargaining Agreements (CBAs). These agreements, usually negotiated between trade unions and employer associations, establish regulations regarding working conditions and salary structures within specific sectors.

7. Personal income, referred to as "Personlig indkomst," is calculated after deducting ATP and any pension contribution relief.

8. Danish businesses with an annual revenue exceeding DKK 50,000 must register as VAT payers, which is done through the RUT website, also known as the Register of Foreign Suppliers (virk.dk). Companies obligated to register for VAT have the option to outsource most of their VAT responsibilities by choosing fiscal VAT representation.

9. The principal parent company within a Danish tax consolidation group is designated as a "management company," responsible for managing tax obligations and final corporate tax payments for all group members.

10. On the annual tax return issued by SKAT, both capital income (known as kapitalindkomst) and any deductions related to it (fradrag and kapitalindkomst) are detailed.

11. Employers are required to pay two-thirds of the contributions to the labor market supplementary pension fund (ATP), while employees are responsible for the remaining one-third, which includes an 8% contribution to labor market expenses.

12. If you have received any form of compensation, it is essential to report various details regarding the period during which the compensation was received. This information is needed by the Danish Business Authority to facilitate the final settlement process. 

13. Euronext Securities Copenhagen (ES-CPH) manages the settlement of securities transactions in Denmark. For professional participants, mutual securities transactions are handled through the European securities settlement system, T2S, whereas transactions for private investors are processed using ES-CPH’s own proprietary settlement system. All participants in either system must maintain a custody account with ES-CPH.

14. To review your settlement, navigate to your individual SKAT account page and click on the option labeled Se årsopgørelsen. If you wish to make adjustments and consider allowances that may apply to your Danish employer, you should select the Ret årsopgørelsen/oplysningsskemaet option.

15. Interest income is referred to as Renteindtægter, while Renteudgifter denotes interest expenses.

16. In situations where predefined Controlled Foreign Company (CFC) income types-such as interest, royalties, or capital gains-constitute over one-third of a subsidiary's taxable profits, specific tax rules and considerations may apply based on Danish tax legislation.

17. Businesses engaged in trade within the EU must adhere to Intrastat reporting requirements. This system is essential for collecting comprehensive data on the movement of goods among EU nations, which helps maintain accurate trade statistics and ensures compliance with EU regulations.

18. As an entrepreneur in Denmark, you have the opportunity to take advantage of various tax relief options that can be included in your annual tax return. These may include deductions for rental expenses (a rental agreement mustbe provided), utility costs in a rented property (receipts or bank transfers are required), and travel expenses for trips outside the country (e.g., bus, plane, or ferry tickets, as well as motorway tolls).

19. The Sumclearing, Intradagclearing, and Straksclearing systems operate with a dual participant structure, accommodating both direct and indirect participants. 

20. Furthermore, Danish entrepreneurs are permitted to deduct expenses such as insurance premiums, child support, pension contributions, commuting costs, and food expenses from their taxable income. However, it is important to note that the Danish tax authorities reserve the right to audit these claims for accuracy within a seven-year period. 

21. When you submit your claim form along with a tax exemption certificate, the Danish Labour Market Fund for Posted Workers will not deduct taxes from your salary. Instead, this fund will notify the Danish Tax Agency of your tax-exempt status, which means you will be liable for taxes in your home country. If you wish to contest a decision made by the Danish Labour Market Fund for Posted Workers, you must submit your appeal to the Appeals Board for ATP within four weeks of receiving the decision letter. Note that the processing time for your appeal may be extended if any required information or documentation is lacking.

22. In Denmark, a business owner cannot be taxed more than 51.5 percent for the prior financial year.

23. Entrepreneurs who choose to operate their own business in Denmark or who remain in the country for a continuous period exceeding six months are subject to full tax liability. This means they are required to file an annual tax return with the Danish tax authorities, accounting for all income earned, both domestically and internationally, in accordance with the double taxation agreement.

24. According to the Act on Part-Time Work, specifically Consolidated Act No. 1142 dated 14 September 2018, part-time employees are entitled to the same rights and benefits as full-time workers, unless the employer can demonstrate that any differential treatment is based on objective justifications.

25. Kapitalindkomst refers to capital income, which includes interest income from sources such as bonds, investments, or deposits, after accounting for the interest expenses incurred from loans.

26. Personlig indkomst signifies personal income calculated after deducting ATP contributions and any applicable pension relief. 

27. In Denmark, all businesses providing goods or services are required to pay a fixed VAT rate of 25 percent. This value-added tax is included in the sale price of the services or goods and must also be reported in the company’s annual tax return.

28. The Danish Labour Market Fund for Posted Workers guarantees that as a posted worker, you can reclaim unpaid wages if your employer fails to compensate you adequately. This recovery can include not only your wages but also holiday pay and pension contributions. 

29. Tax refunds are deposited into the NemKonto that has been set up by the Danish entrepreneur. 

Classification of Danish annual accounts 

The type of company’s annual tax settlement with SKAT is determined by the entrepreneur’s choice of business structure in Denmark. Therefore, it’s important to assess which form of Danish business, and the corresponding taxation and annual reporting obligations with the Danish Tax Authority, will best meet our expectations and capabilities. 

Taxation for a Danish sole proprietorship varies from that of a limited liability company, joint-stock company, limited partnership, or general partnership. Sole proprietors are typically subject to personal income tax on their profits, meaning that the business income is directly taxed as personal income. In contrast, limited liability companies and other corporate structures face different tax obligations, including corporate tax rates and distinct filing requirements, which can affect overall liability and financial planning.

Various types of company tax returns are recognized in Denmark, including:

• The annual tax return for a sole proprietorship (Enkeltmandsvirksomhed);
  
• The annual tax return for a limited liability company (Aktieselskab - A/S);
  
• The annual tax return for another form of limited liability company (Anpartsselskab - ApS);
  
• The annual tax return for a limited liability company classified as an Iværksætterselskab (IVS) since January 1, 2014;
  
• The annual tax return for a limited partnership (Kommanditselskab - K/S);
  
• The annual tax return for a general partnership (Interesselskab - I/S);
  
• The annual tax return for a branch of a foreign company (Filial af udenlandsk selskab);
  
• The annual tax return for a cooperative association (Andelsforening / Brugsforening);
  
• The annual tax return for a representative office of a foreign company (Salgskontor)
  

It is mandatory for business owners in Denmark to submit their tax return for the previous tax year by July 1. Timely submission ensures compliance with tax regulations and helps avoid potential penalties.

Schedule for annual financial account submissions in Denmark

Business owners in Denmark are allowed to settle their taxes, correct their tax returns, or contest decisions made by SKAT (Skattestyrelsen) for a period of up to three years and four months. While Danish entrepreneurs can benefit from tax allowances, it is important to note that the tax authorities have five years to verify the accuracy of these allowances reported in the tax return. Consequently, retaining all documentation related to incurred expenses during this time is crucial for Danish company owners.

The deadline for tax settlement for individuals who have limited tax liability, including those residing in Denmark, is established between March 1 and May 1. Should you plan to jointly settle taxes for the previous year with your spouse and take advantage of the Cross Border tax credit, this must be done by June 1. Furthermore, Danishentrepreneurs and tax non-residents from other EU countries are also obligated to conclude their tax matters with the Danish tax authorities by July 1.

Submitting an application for a new residency document before December 31, 2023, is essential for individuals who meet the conditions specified in the Withdrawal Agreement and have been lawfully residing in Denmark prior to January 1, 2021, but have not yet applied. After registering your residence and obtaining a Central Person Register (CPR) number in Denmark, it is recommended to apply for an income tax card (Skattekort). 

Bill L 28 was enacted on December 31, 2021, and it pertains to income years starting on January 1, 2021, or thereafter. Under this new legislation, companies are required to submit their transfer pricing documentation within 60 days after the deadline for tax return submissions, with the first deadline established as June 30.

Following July 2, a document referred to as Årsopgørelse is issued and dispatched by SKAT to Danish taxpayers. This document outlines the tax decision, specifying the amount of refund (indicated in green as Skat til udbetaling) or surcharge (noted in red as Restskat til betaling). 

Annual financial declaration for sole proprietorships in Denmark

Income generated from self-employment (Enkeltmandsvirksomhed) is classified by Skattestyrelsen (SKAT) as personal income for the entrepreneur. Consequently, this income is reported on a unified tax return, which encompasses business tax. By paying taxes and social security contributions, the business owner gains access to pension and health benefits comparable to those available to employed individuals in Denmark.

Filing tax returns, which encompass both income tax and VAT, is required on the SKAT website either quarterly or biannually. Due dates for advance income tax payments fall on March 20 and November 20. Taxpayers can opt to make a larger advance payment on March 20, which may lead to a tax refund with interest ratessurpassing those offered by banks. In contrast, on November 20, the interest rate decreases by 0.4%, making it less advantageous than bank rates.

By July 1, a Danish entrepreneur operating a sole proprietorship is required to submit their tax return for the previous year. Feedback on the tax decision will be automatically provided if the return is filed through the SKAT website.

To file taxes online, it is essential for the entrepreneur to obtain the TastSelv-kode in advance from tastselv.skat.dk. This eight-digit code, or the NemID as an alternative, serves as a password for accessing personal tax information. Additionally, after July 2, the owner of a Danish company should expect to receive a tax return form known as Selvangivelse from SKAT, followed by the tax decision document called Årsopgørelse.

Entrepreneurs in Denmark have the ability to deduct a range of expenses, which include:

• costs incurred from purchasing goods for resale, 
• company insurance expenses, 
• rent for business premises, 
• telephone and networking costs, 
• company vehicle expenses, 
• maintenance and repair costs for business locations, 
• heating and electricity expenses, 
• expenditures on machinery, equipment, and facilities (if not deductible at the time of purchase, these should be recorded as depreciation), 
• costs associated with inventory, 
• fees paid to auditors and solicitors.

Certain items, including equipment, machinery, goods, and plant intended for personal use-even if acquired for business purposes-are not eligible for deductions on the company’s annual tax return. It is essential to retain all documentation related to allowable expenses for a duration of five years.Filing of tax returns is required within six months after the end of the tax year, which may correspond to either the calendar year or a different 12-month period. If the tax year concludes between February 1 and March 31, the submission deadline is set for August 1, while tax payments are scheduled for March 20 and November 20.

For taxing their business, Danish sole proprietors have three choices available: 

I. They can opt for taxation under the Share Capital Act (Kapitalafkastordning), which permits a portion of the company’s profit to be allocated as personal income while another portion is categorized as capital income.

II. Alternatively, they may choose to tax the profit as personal income, akin to how employed individuals are taxed.
III. The third option involves taxation according to the Companies Act (Virksomhedsordning), which enables the deduction of expenses related to credit interest and allows profits to be saved in a bank, potentially offering financial benefits.

Corporate accounting on an annual basis in Denmark

Income tax for all Danish companies must be reported on total income, which encompasses earnings from property and capital, within six months after the tax year concludes. Companies with an annual turnover exceeding DKK 50,000 are subject to a 25%VAT, in addition to the mandatory 22% corporation tax (CIT) that all entrepreneurs in Denmark must pay.

The deadline for Danish business owners to submit their annual tax return is July 1 each year. To complete this, they utilize the Selvangivelse form, which is provided by SKAT and must be submitted online at www.skat.dk. This form accounts for any applicable allowances.

When it comes to limited liability companies (Anpartsselskab - ApS) and joint-stock companies (Aktieselskab - A/S), owners are not personally responsible for the company’s debts; their liability is limited to their investment in the company's capital.It is the shareholders’ duty to report and manage the taxation of their income or dividends with the Danish tax authorities. 

Entrepreneurs in Denmark running general partnerships (Interesselskab - I/S) have the flexibility to select from three taxation options, similar to those available for sole proprietorships:

1. Taxation according to the Share Capital Act (Kapitalafkastordning): This option allows a portion of the company’s profit to be allocated to personal income, while another part can be classified as capital income.

2. Taxation of profit as personal income: This method treats profits similarly to how income is taxed for employed individuals.

3. Taxation under the Companies Act (Virksomhedsordning): This option enables the deduction of costs associated with credit interest, while allowing profits to be held in the company as bank savings, providing certain benefits. 

Limited liability companies (Iværksætterselskab - IVS) are recognized as separate legal entities; however, they are still required to prepare public annual accounts.

The open report for Danish companies should consist of the following components:

• a brief overview of the activities conducted by the company’s board of directors,
• an annual balance sheet, 
• a profit and loss statement, 
• a report on changes in equity, 
• supplementary information.

To finalize the annual tax settlement, Danish company owners are required to submit the following documents:

• Årsopgørelse: This is a document issued by SKAT after July 2, which outlines the tax decision, including any refund or surcharge amounts. 
• Oplysningsseddel: Similar to a PIT-11, this summary of employee earnings must be provided by employers at the end of the tax year. 
• Selvangivelse: This tax return form is sent by the Danish Tax Authority and needs to be completed and submitted by the company owner.
• Lønseddel: Employers are required to provide weekly or monthly payslips to their employees.

Additionally, if the company employs staff, the employer is responsible for ensuring that all necessary documentation for the employees' annual tax returns is provided.

Questions and answers

1. What is the deadline for companies in Denmark to file their annual tax return?

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

2. What is the process for ordering a Tastselv?

To obtain a Tastselv code, visit www.skat.dk and follow these steps:

• Click on "Log på."
• Select "Bestil kode."
• Choose "TastSelv kode."
• Input your CPR number with a dash in the designated field.
• Select your preferred access method for the password (SMS, e-mail, or letter).
• After receiving the code, log in to skat.dk using "Log på med TastSelv kode."
• Enter your CPR number and wait for the code.
• Create a new password (8 to 16 characters), confirm it, and click "FORTSÆT."
• Once these steps are completed, you will be logged in using the TastSelv code.
  

3. Which websites should entrepreneurs in Denmark be aware of?

Entrepreneurs in Denmark should be familiar with several key websites:

• The Danish Customs and Tax Administration at skat.dk.
• The Danish Aliens’ Board, accessible via nyidanmark.dk.
• The International Citizen Service for information aimed at foreigners, available at icitizen.dk.
• The Danish Ministry of Employment's website at workindenmark.dk.
• Additionally, Borger.dk and lifeindenmark.dk provide useful resources for residents.

4. In which location can I report a change of address for official correspondence?

You can update your official correspondence address at Borgerservice. 

5. What is the meaning of sundhedsbidrag?

The term sundhedsbidrag refers to contributions for health insurance.

6. Which terms can I find on my annual tax return?

The annual tax return includes several key terms, such as:

• Bundskat: This refers to the bottom tax rate, which is 8%.
• Topskat: Known as the top tax, set at 15%.
• Skrå skatteloft: This denotes the top tax paid to both the municipality and the state, excluding contributions to the Labour Fund and church tax.
• Personlig indkomst: This indicates personal income from employment, factoring in allowances like benefits and pension contributions.
• Skattepligtig indkomst: This represents personal and capital income after deducting allowable expenses, constituting taxable income.
• Ligningsmæssige fradrag: This refers to deductions from municipal and health taxes.
• Kapitalindkomst: This means capital income, or interest income, after deducting interest expenses.
• Fradrag: Represents deductions taken from income.
• Kommuneskat: Refers to municipal tax.
• AM-bidrag: An 8% contribution to the Labour Fund.
• Lønindkomst (inkl. fri bil/telefon): This is income from employment, including benefits like a company car or phone.
• Eget pensionsbidrag: Indicates the individual portion of the pension contribution, set at 5%.
• Personalegoder: Refers to employee benefits, such as health insurance.
• Renteindtægter: This means interest income.
• Renteudgifter: Refers to interest expenses.
• Beskæftigelsesfradrag: This indicates labor-related deductions.
• Befordringsfradrag: Refers to travel deductions.
• Håndværkerfradrag: Known as craftsmen's relief.
• Skattepligtig indkomst: This denotes taxable income.
• Skatteberegning: Refers to tax assessment.
• Ejendomsværdiskat: This is property tax.
• Personfradrag bundskat: Refers to the bottom tax-free amount.
• Personfradrag kommuneskat: This indicates the municipality tax-free amount.
• Beregnet skat: Refers to the accrued tax amount.

7. What is the car tax rate in Denmark?

The luxury tax on cars in Denmark can reach as high as 180% of the vehicle's net purchase price.

8. When do I need to submit my tax return to the Danish tax authorities?

The deadline for filing the tax return for the prior tax year is May 1 for employed individuals and Danish residents, while Danish entrepreneurs must submit it by July 1. SKAT establishes this date and includes it on the Selvangivelse tax form sent to taxpayers. A penalty of DKK 5,000 applies for failing to file a tax return. Additionally, Danish taxpayers have a period of three years and four months to amend the return for the relevant tax year. 

9. How much were the income tax percentage rates in Denmark for 2019?

For 2019, Denmark had the following income tax rates: 8% on earnings below DKK 50,217, 39.2% on income between DKK 50,217 and DKK 558,043, and 56.5% on income over DKK 558,043.

10.What is meant by begrænset skattepligt?

The term begrænset skattepligt refers to limited tax liability.