4 important steps to follow after your new ApS is incorporated

After your new ApS is incorporated, then there are 4 important steps to follow. If we incorporated the ApS for you, then we will assist you getting these 4 steps done correctly.

4 important steps to follow after your new ApS is incorporated

After your new ApS is incorporated, then there are 4 important steps to follow.

If we incorporated the ApS for you, then we will assist you getting these 4 steps done correctly.

Step 1: Apply for a “NemID”

You will need a “NemID” for your company.

A “NemID” is a digital signature, which is used when you log into government websites, use internet banking systems and many other places online.

Your new “NemID” can be ordered here (click this link)

Unfortunately the website is only in Danish, so please let us know, if you need our help to apply for the “NemID”.

Step 2: Create a mailbox on “e-Boks”

All mails from the government to the company, is sent to a digital mailbox called “e-Boks”. Also some private companies will offer to send their mails here.

It works like a webmail, where you are able to read the mails after login. You login using the “NemID”.

Once you have the “NemID” for the company, you therefore will need to create the company “e-Boks”.

Create a mailbox on “e-Boks” (click this link)

Please let us know, if you need our help to create the “e-Boks”.

Step 3: Allocate a “NemKonto”

Once you have created a new bank account for the company, then we need to make sure, that your bank has appointed the new company bank account as the company “NemKonto”. A “NemKonto” is basically just the normal company bank account, that gets allocated a permission to act as “NemKonto”.

Having a “NemKonto” will enable refunds from the government (VAT, tax) to be transferred. Without a registered “NemKonto”, then refunds will wait for a bank account to be allocated as “NemKonto”. In other words:

No “NemKonto” = No refunds of VAT or tax.

Check if the company bank account is allocated the role of “NemKonto” (click this link)

You can also contact your bank, and ask them to confirm, that your company has a “NemKonto” allocated. If you do not have a danish bank account, then we are able to apply for using a foreign bank account as “NemKonto”. This is done on a special form.

Please let us know, if you need our help to check, if the company has a “NemKonto” allocated.

Step 4: Transfer the company equity from the lawyer

Once you have created a new bank account for the company, then the lawyer can transfer the equity capital to the company. This is the minimum 40.000 DKK required initial equity capital, that you deposited during the incorporation process to the lawyers client account.

Please send us this information about the new company bank account:

Bank name
Sort code
Account number
IBAN
SWIFT

Then we will ask the lawyer to make the transfer to you.

If you have a foreign bank account, the equity capital can be transferred here also.

But the bank account has to be registered in the company name. And be aware that online banks like “Revolut”, is not considered real banks in this sense, since these are in reality just deposit accounts.

Therefore the equity capital cannot be transferred to this type of online banks.

Please let us know, if you need our help getting the company equity transferred.

Do you have any questions to these 4 steps after your ApS is incorporated?

Please send us an email: info@daniaaccounting.com

Listen to our podcasts, watch our videos, or visit us on social media, and learn more about us, tax, vat, how to start a company and much more:

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Bankruptcy – what really happens and how fast does it actually go?

Almost every person that has ever tried to start their own company, knows the fear of running out of money. When you have a company, the technical term for that, is to go “bankrupt” – or to be declared “bankrupt”. The whole process leading up to being bankrupt, we call a bankruptcy. This blog only explains the bankruptcy process for limited liability companies (IVS, ApS and A/S).

Bankruptcy – what really happens and how fast does it actually go?

Almost every person that has ever tried to start their own company, knows the fear of running out of money.

When you have a company, the technical term for that, is to go “bankrupt” – or to be declared “bankrupt”.

The whole process leading up to being bankrupt, we call a bankruptcy.

This blog only explains the bankruptcy process for limited liability companies (IVS, ApS and A/S).

For sole proprietors a bankruptcy can be much more serious.

A seperate blog will be written about this.

If you are interested in closing your LTD company, without going bankrupt, then listen to our podcast here: Podcast about closing a LTD

You risk going bankrupt, when your debts are higher than your assets

Just because you have a short period of time, where you run out of money, does not mean that you are bankrupt.

Very often entrepreneurs somehow always manage to pay their bills.

Maybe they get a loan from someone.

Or maybe they all of a sudden get a new client.

Usually things turn out just fine.

But if you keep having more costs than income, then over time, you will be stearing more and more towards a bankruptcy.

We operate with 2 terms, that each defines, if you can go bankrupt.

1: Solvency

You are solvent – and therefore have solvency – if you have more assets than liabilities (debt).

Imagine that you owe the bank 10.000 DKK, but you have 11.000 DKK standing on a bank account.

If you would simply transfer the money from one bank account to the other bank account, there would still be 1.000 DKK left on your bank account.

This means you are solvent.

Or written in another way; you can pay all your liabilities (debt).

2: Insolvency

You are insolvent – and therefore have insolvency – if you have more liabilities (debt) than assets.

Imagine that you owe the bank 11.000 DKK, but you have 10.000 DKK standing on a bank account.

If you would simply transfer the money from one bank account to the other bank account, there would still be 1.000 DKK left that you owe to the bank.

This means you are insolvent.

Or written in another way; you are not able to pay all your liabilities (debt).

When you stop paying your bills

When you stop paying your bills, for whatever reason, then at some point, your creditors will get tired of waiting for their money.

If you are not paying, because you are not satisfied with a product or a service delivere, then make sure to write the creditor.

So there can be no doubt, that you have expressed your dissatisfaction.

Sometimes maybe a settlement can be reached.

If you keep failing to pay, and no complaints have been made by you about the product or service, then the creditor can take you to court.

The first reminders

Once you start receiving the first reminders, then it is time to act.

And in that sense, it is not relevant of you have money or not.

Take action.

Take action – speak with your creditors

If you are not satisfied with a product or service delivered, write a mail and state what the problem is.

And also suggest a solution.

Maybe a discount will solve your problem.

If the main reason is a lack of money, then call the creditor, and explain the situation.

Be honest.

Most companies understand, that we can all have bad times.

The worst is having a client that does not call, and continue to not pay.

A client like that, most companies will take to court.

If a client has called, and explained the situation, chances are that the debt will be cancelled.

Naturally it depends on how much the debts is.

And the circumstances regarding your lack of payment.

Use leverage to make settlements

By being completely honest and transparent about your situation, you can often use this as leverage.

Send your PnL (profit and loss statement) and balance to the creditor.

Show them your financial situation.

If they can see, that you do not have any money, chances are they are not going to court.

This is because they will have to pay for the court, and their own lawyer as well, if your company has no money.

Try instead and use this to get a settlement.

Maybe a discount.

Or a payment plan.

Most creditors will understand, that it is better to get something than nothing.

Leverage.

And try to save your company.

Setting up a new company – moving activities and assets

You can decide to setup a new company.

That can happen before or after the bankruptcy starts.

Often it makes very good sense to do it before.

Especially if you owe the tax office money.

Otherwise you might be in a situation later, where the tax office will refuse to register a new company from VAT or as an employer, unless you deposit an often large amount as a security deposit (usually 100.000 – 200.000 DKK).

The good new is, that this security depost can be used to pay for VAT or employee taxes in the new company, once the registration is in place.

Repaying loans, bank credits and suppliers prior to a bankruptcy

Repayments you do prior to a bankruptcy, can always be questioned.

This is because you are not allowed, to have some “favourite” creditors, which gets paid while others do not get paid.

Sometimes a curator will look 1-2 years back in time.

And he has the power to reverse repayments, and ask creditors to refund the money to the company.

In terms of banks, then repayments of a credit f.ex., can only be deemed invalid, if you tell the bank before, that you have problems.

So avoid telling the bank, that you are on the verge of a bankruptcy, if you do not want the money to go back to the curator.

Often credits in the bank is signed with personal assets as collateral.

So people often pay these credits first.

To avoid having to pay themselves.

So be careful who you tell in the bank.

If they know you will go bankrupt anytime soon, they are not allowed to accept the repayment.

Someone needs to take action

Before you can be taken to court, then someone naturally needs to take action.

And this can take a long time.

The first letter from the court

Make sure that your accounting is done

Be prepared for the bankruptcy.

This is done by having your accounting done.

In addition to serving as a tool for the curator, it will also help you not being banned from managing future companies.

We call this a “bankruptcy quarantine” – read more about a bankruptcy quarantine below.

Court day

When a creditor has contacted the court, then you will receive information about a court day.

Normally you are able to participate via a telephone session as well.

But make sure to contact the court, if you want to participate via a telephone session.

And if you are not able to come on the date, then also make sure to call the court.

Failing to show up in court, can get you arrested.

Curator

The curator is a lawyer which is appointed by the court.

The job of a curator, is to try and secure as much money as possible for the creditors.

You no longer control the company – including the bank account

Once the bankruptcy process starts, then you are no longer in control.

From now on the curator makes the decisions.

It also means that your acces to the bank account will not work anymore.

If you have a shop, then most likely you will find, that the locks will be changed.

Often without any warning.

This is because the curator wants to make sure, that you do not remove any assets from the shop.

Receivables from clients

If you have any receivables from your clients, that has not yet been paid in full, then your clients will need to pay to the curator.

And not to you.

Other assets

The curator will try to sell all the company assets.

Often the price is low, since it has to go fast.

You can also buy the assets from the company

If the price for the asset is low, then remember that you can also buy the assets from the curator.

Just place an offer on the assets you want to buy.

How long time does a bankruptcy process last?

From the time a creditor takes you to court, it can take 1-2 months before a court date is set.

If you add the time, from when you started failing to pay the creditor, then often 3-6 months is already gone.

A curator usually works on a bankruptcy for 1-2 years.

Sometimes even longer.

The end of the bankruptcy

Once the curator is done, he will send an overview of the bankruptcy:

How much money was realised from the assets.

How much will be paid to the creditors.

That will end the bankruptcy.

And the company will change status on CVR to being “bankrupt”.

The aftermatch

Usually you will not hear more from the curator or court, once the bankruptcy is finished.

The company is closed.

And the last unpaid debts dissapeared with the company closure.

Banned from managing companies

If you are shown to have conducted your management in a bad way, f.ex. failing to do your accounting ongoing, then you will often be banned frmo managing other companies for a duration of 3 years.

We call this a “bankruptcy quarantine”.

Should you breach the bankruptcy quarantine later, then you can be fined.

And in very bad situations you can be imprisoned for 6 months.

Do you have any questions abbout going bankrupt?

Please send us an email: info@daniaaccounting.com

Listen to our podcasts, watch our videos, or visit us on social media, and learn more about us, tax, vat, how to start a company and much more:

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How to close an ApS or IVS

In order to close an ApS or IVS, you first need to decide on a strategy. The strategy you choose, will mainly depend on the financial situation of the company, and also on your own personal preference, in terms of either making a closure that is considered “by the book” (the nice way), or if you want to simply force a closure upon the company (the bad way).

How to close an ApS or IVS

In order to close an ApS or IVS, you first need to decide on a strategy.

The strategy you choose, will mainly depend on the financial situation of the company, and also on your own personal preference, in terms of either making a closure that is considered “by the book” (the nice way), or if you want to simply force a closure upon the company (the bad way). The latter considered a more “dirty move”. Finally there can be a situation, where the closure is initiated by the court, and then the decision of course, is out of your hands. This happens when the company has failed to pay one or more of its obligations, and a creditor has asked the court, to help retrieving his or hers money. If the court then finds, that there is not enough money to pay the creditor, then a bankruptcy will be initiated.

Generally speaking there are 2 situations, when closing a company

1: When the company does not have enough money to pay its obligations

2: When the company has enough money to pay its obligations

Therefore ask yourself first, what situation your company is in.

If you want to close the company in a “nice way”, and find yourself in situation 1, then you need to allocate more ressources (money) to the company first, so you can start paying of all the debts, prior to closing the company.

Once the debts have been paid, then you can start closing the company.

At the time of closure, you and the other shareholders (if any), will sign a statement that all debits has been paid. It also will mean, that you are personally liable later on, in case debts was not paid after all. So it is not smart just to pretend, that everything has been paid. Should something popup later, you will need to pay yourself. It also goes for potential lawsuits and future obligations, that you might try to avoid by making the closure. So think carefully before choosing the “nice way”. Things have to be calm and debts paid, and there should be no potential lawsuits or claims in the holrizon. If there is, you are usually better of closing the company in the “bad way”, where a court makes a forced closure. This will secure yourself better, in terms of your private obligations.

If you find yourself in situation 2, then the next step is up to you. The considerations are still the same in terms of future lawsuits and claims.

Make sure nothing is waiting for you in the horizon. If the coast is clear, and all debts is paid, then you can close the company in the “nice way” – or “by the book” as we also say.

Closing a company “by the book”

The first step to close a company “by the book”, is getting all the accounting done, up until the day, where you want to close the company.

When the accounting is done, then the VAT can be declared for the last period.

And after this, the VAT registration needs to be cancelled.

If you have employees, that last salary needs to be done as well, and you need to make sure that all employee taxes has been declared for all periods.

The company registration as an employer, also needs to be cancelled.

If you are registered for other obligations (f.ex. import/export/duties), then these also will need to be cancelled and all declarations needs to be submitted.

We then will inform the tax office what day, the company will close from a tax perspective.

This day is usually not the same, as the day where the company will close.

This is because we need first to declare the company income tax up until the last “tax day”.

After the company income tax has been declared, we then can retrieve a statements from the tax office, that all tax and VAT has been settled (once of course, you have paid all due tax and VAT).

This statement from the tax office can take 3-6 months to get, after we submit a request.

So the whole closure process is quite long.

Once we have the statement from the tax office, we then will make a statement that you and the other owners need to sign, stating that all debts has been paid in the company.

When this is signed by everyone, we can submit the final request to close the company at the Danish Business Auhority.

The closure is usually a reality 1-2 weeks after we submit the documents.

Checklist for the closure

Here are the steps for a closure:

Step 1: Check that you have all invoices and bank statement until the day of closure.

Step 2: Finish the accounting up until closure date.

Step 3: Declare VAT for all open periods.

Step 4: Check that employee taxes are declared – if you see any “FF” amounts in Skattekonto these needs to be solved.

Step 5: Deregister for VAT and as employer.

Step 6: Make the tax declaration for last year on SKAT Erhverv. And for the current year (the closing year) make the special manual PDF tax declaration (“ophørende selvangivelse”). If tax is payable, make sure to change the tax payment for the current year, and pay the remaining tax now.

Step 7: Apply for the payment confirmation (“betalingserklæring”) from the tax office.

Step 8: Write the shareholders about their payment confirmation (“betalingserklæring”)

Step 9: Close company on VIRK when you have both the payment confirmation for the tax office and shareholders.

Initiating a closure using the “dirty move”

If you are in a situation, where you want to initiate a closure through bankruptcy, but your creditors are not pushing you or at least it seems like it will take too long time (if you want to see some action now), then you can consider to let the managing director resign.

By doing this, the government will have to initiate a forced closure within a short period of time.

A laywer will be appointed as a curator, and will manage the forced closure.

The downside here is, that from the time where the managing director resigns, you are not allowed to make any actions in the company. This includes paying bills and making decision for the company. All this you will leave in the hands of the curator. This can sometimes be annoying, but if you are 100% sure, that this is the way the company is going (towards a bankruptcy), then it is a fast way to get the process started.

The whole process however can the years, before the company is actually closed.

But it will give you some peace of mind in terms of your creditors, since you are able to refer them to the curator (and the pending bankruptcy), when they start pushing you for payments.

Closing a company through a bankruptcy

If your ApS or IVS is unable to pay all of its obligations to the bank, tax office, loans, suppliers etc., then you will be unable to dissolve the company without declaring bankruptcy.

A bankruptcy can be initiated in several ways, but most often a company would fail to repay a loan or a supplier, which then would ask the court to help getting the money.

Once the case would go to court, and it becomes apparent that the company does not have money to pay its debt, then the court would declare a bankruptcy for pending.

As part of this step, the managing director would be removed and a curator appointed (a lawyer).

From then on all decicions is made by the curator.

The managing director and owners will no longer be able to access the bank account, and also they are unable to make decision on behalf of the company.

All actions is decided by the curator.

The mission of the curator is to secure the best interests of the company, making sure that as many creditors gets paid as possible.

Do you have any questions to closing your IVS or ApS?

Please send us an email: info@daniaaccounting.com

Listen to our podcasts and learn more about us, tax, vat, how to start a company and much more:

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How to make a cash report (instructional video)

Watch our instructional video here on how to make a cash report (in Danish: “kasserapport”). A cash report is required by law in Denmark, if your company receives cash from its clients. It is normally shops, restaurants, café and similar types of companies.

How to make a cash report (instructional video)

A cash report is required by law in Denmark, if your company receives cash from your clients.

It is normally relevant for shops, restaurants, cafés and similar types of companies.

The cash report shows, which money that came and left your cash register.

You are required by law to keep an account of all the cash transactions daily, and to verify them as well, by doing a count of your cash every day at closing time.

We can teach you how to make a cash report if needed.

If you want to download a template for a cash report, then you can click here to a download a cash report template in Excel or PDF

Please also watch our video here below, that shows how to make a correct cash report:

Do you have any questions about cash reports?

Please send us an email: info@daniaaccounting.com

Listen to our podcasts and learn more about us, tax, vat, how to start a company and much more:

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Company income tax and dividend tax for limited liability companies

Limited liability companies pay a company income tax of 22% (2019). Company income tax is paid on the taxable revenue, which means that in order to estimate how much you’ll pay in tax, you must take your company turnover (sales) and subtract the company costs, including depreciations and interest etc.

Company income tax and dividend tax

Company income tax

Limited liability companies pay a company income tax of 22% (2019).

Company income tax is paid on the taxable revenue, which means that in order to estimate how much you’ll pay in tax, you must take your company turnover (sales) and subtract the company costs, including depreciations and interest etc.

In addition to this, a few tax regulations are done, and the remaining amount, which is either a revenue or a deficit, will be subject to a 22% company income tax if it is a revenue, or if there is a deficit, then no company income tax is to be paid of course.

Deficits can be brought forward

A deficit in the taxable company income, can be brought forward to future years, where it is offset in revenues, before the company needs to pay any company income tax.

Example:

If you have a deficit in the first year, for instance, you can offset the deficit with the following year’s revenue. You may have a deficit of 100.000 DKK in 2019, but if your revenue in 2020 is 100.000 DKK, you can then offset the deficit you had in 2019, so that your taxable income in 2020 is 0 DKK.

Dividend tax

Dividend tax is paid, when dividends are paid out to the shareholders.

The company needs to have produced a revenue, in order for dividends to be paid.

Holding companies that owns more than 10% of a company, does not have to pay dividend tax, when the holding company receieves a dividend from a company where it holds shares.

For dividends that are taxed, then the first 54.000 DKK (2019) will be taxed with 27%.

If the dividend exceeds 54.000 DKK, then the amount above 54.000 DKK is taxed with 42%.

Read more below about company income tax and dividend tax.

Payment of company income tax

Company income tax is due for payment 20 March and 20 November each year.

These 2 payments will naturally be based upon an estimate, since nobody knows the actual revenue before the year has ended.

In addition to the these 2 payments, there is an optional extra third payment the 1st of February, in the year after the fiscal year ends. This enables the company to adjust the payments of company income tax, once the accounting is done for the fiscal year that has ended. By paying more company income tax here, the company can save money on later interests for late payment of company income tax.

If you have a limited liability company, then the first time you receive a letter from the tax office about having to pay company income tax, then it will almost always state, that you have estimated to pay 0 DKK in company income tax.

This is because the tax office doesn’t know yet, how much you’re supposed to pay, so they’ll send a letter, informing you that these partial payments are due in March and November, but they won’t state the payment amount;

You must estimate your payments on your own.

In Danish language the 2 payments of company income tax done in March and November is called “ordinære aconto selskabsskatterater”.

How do you estimate your payments?

Let’s say you’re in the month of January, and you already know, that you are going to have revenue this year.

Make an estimate for the entire year, as precisely as you can. After interest and depreciation, take 22% (this will be the company income tax) of the revenue and divide by two – this will be the 2 payments for 20 March and 20 November.

You need to regulate the payments on the tax office website “SKAT Erhverv”.

Here you will also find the payment details for your internet bank.

If the amount isn’t precise, it’s no big deal, because when the year is finished, you’re required to make an annual report and submit a tax declaration.

Then in the following year, you’ll pay the remaining tax or receive a refund, depending on whether you over- or underestimated your payments.

Annual reports needs to be submitted 5 months after the fiscal year has ended.

Company tax declarations needs to be submitted 6 months after the fiscal year has ended.

The tax statement is received in November, in the same year the tax declaration is submitted.

If there is any remaining company income tax due for payment, then it needs to be paid 20 November the same year.

Split fiscal year

Limited liability companies don’t necessarily have to follow the calendar year.

They’re allowed to have a split year, which means you may have up to 18 months in your first fiscal year.

For instance, if you start the company on 1 July 2019, then your first year can run from 1 July 2019 to 31 December 2020, which is 18 months.

Another option is for the first year to end on 31 December 2019.

It’s completely up to you, but the maximum is 18 months in the first fiscal year.

The following fiscal years will always be 12 months.

If you choose to have 18 months in the first year, then the tax gets more complicated.

You will then have a partial payment on November 20th in the first year and also in March and November in the second year (all payments belonging to the first fiscal year).

The fiscal year has to be finished, before we submit the tax declaration, so in this example with a 18-month fiscal year, then the fiscal year would start on 1 July 2019 and finish on 31 December 2020, after which the tax declaration would be submitted on June 30th 2021.

Company income taxes are declared 6 months after the fiscal year ends.

In this example with a 18 months fiscal year, after we submit the tax declaration on June 30th 2021, then the tax office will calculate the actual company income tax, which will be 22% of the taxable revenue (2019), plus some interest.

This tax will be due on 20 November 2021, and any tax you might already have paid in November (first year) and March and November (second year), will be offset in the total company income tax due.

You’ll receive an annual company income tax statement that will show all this information, including your revenue from 1 July 2019 to 31 December 2020, as well as the 22% in company tax and added late fee interest, which is around 4% (2019).

You can also receive a comapny income tax refund.

This happens if you paid too much in company income tax.

Companies that don’t follow the calendar year

A company can decide when they’d like their fiscal year to end, but only 10% of our clients choose something other than the calendar year. Most companies choose 31 December, because it’s easier to produce an annual overview, if it follows the calendar year.

But some people prefer ending the year on 30 June or 31 January.

For those who do not follow the calendar year, the company income tax can get tricky.

Let’s assume that you have June 30th as the end of your fiscal year, for example.

You’re still allowed to have 18 months in your first fiscal year, but if you start a company on 1 July 2019, and your fiscal year ends on 30 June 2020, then your first fiscal year will only be 12 months.

The partial company income tax payments make this a bit complicated.

In the first year, 2019, as is normal, that you most likely will not pay anything in November.

Then in 2020, you’ll make a partial payment in March, and even though the year finishes on 30 June 2020, the partial payment you make in November 2020, still counts toward your first fiscal year, despite being paid after the first fiscal year has finished.

One advantage of this is you can avoid paying interest, because you have more time to calculate the correct revenue, from which you can calculate exactly how much you must pay in additional tax for the last installment on November 2020.

Dividends & dividend tax

After you have paid the company income tax of a revenue, then the money that is left, which is basically the revenue after tax, is an amount that you can either keep in the company to increase your equity or pay it out as a dividend to the shareholders.

If you choose to pay a dividend to the shareholders, then sometimes dividend taxes needs to be paid.

If your company is owned by a holding company

If you have revenue in your limited liability company, and you want to transfer this revenue to your holding company, then it comes down to how many shares your holding company owns. If your holding company own more than 10% of the shares, then you are allowed to pay out a dividend to the holding company, which will be paid from the result after tax, without paying any dividend tax.

Why would you do that?

By transferring the revenue from the company to the holding company, then creditors will not be able to claim this money later, if something was to go wrong.

This is because the money has been paid out as a dividend to the holding company.

When the money is paid to the holding company, then you can use it for new investments, or just hold it there for safety purposes.

The tax office can in some situations claim the money again from the holding company, if f.ex. employee taxes are unpaid (but this requires a 50% or more shareholder stake by the holding company).

Sole shareholder

If you are the sole shareholder, then you are also allowed to pay out money to yourself.

There are three ways you can do this: through an invoice as a sole proprietor, getting a payslip or getting a dividend.

An invoice
Some shareholders might own a sole proprietorship, and can then send an invoice to the limited liability company for their work, and then get paid this way.

A payslip
You can also be hired as an employee in the company, and then receive a payslip from the limited liability company for your work.

A dividend
You can also receive a dividend from the company, where up to 54.000 DKK is taxed at 27% (2019).

Dividends exceeding 54.000 DKK is taxed at 42% (2019).

Examples on calculation of dividend tax and total taxes

If the company income tax is 22%, and dividends up to 54.000 DKK is taxed at 27% (2019), and dividends exceeding 54.000 DKK is taxed at 42% (2019), then the calculation looks like this:

Dividend paid: 50.000 DKK

In order to pay the dividend, then the company already had to pay 22% in company income tax.

The 22% company income tax is: 14.102 DKK (revenue before tax: 64.102 DKK – company income tax of 22%: 14.102 DKK = the remaining amount is 50.000 DKK, which then can be paid as dividend).

You then need to pay an additional 27% in dividend tax from the 50.000 DKK. This will be: 13.500 DKK

In total you will have paid the following taxes: 14.102 DKK (22% company income tax) + 13.500 DKK (dividend tax) = 27.602 DKK in company income tax and dividend tax – or what equals 43,06% of the 64.102 DKK revenue before tax.

Dividend paid: 100.000 DKK

In order to pay the dividend, then the company already had to pay 22% in company income tax.

The 22% company income tax is: 28.205 DKK (revenue before tax: 128.205 DKK – company income tax of 22%: 28.205 DKK = the remaining amount is 100.000 DKK, which then can be paid as dividend).

You now neeed to pay 27% in dividend tax on the first 54.000 DKK (2019), which amounts to: 14.580 DKK.

Furthermore you need to pay 42% in dividend tax, on the dividend exceeding the 54.000 DKK (42% of 100.000 DKK – 54.000 DKK = 46.000 DKK * 42%), which equals: 19.320 DKK.

In total you will have paid the following taxes: 28.205 DKK (22% company income tax) + 14.580 DKK (dividend tax 27% up to 54.000 DKK) + 19.320 DKK (dividend tax 42% of the dividend exceeding 54.000 DKK) = 62.105 DKK in company income tax and dividend tax – or what equals 48,44% of the 128.205 DKK revenue before tax.

Married couples

There are special rules, if you are married.

The amount you can pay as a dividend with the 27% dividend tax is doubled, so that instead of 54.000 DKK, you can pay out 108.000 DKK (2019).

So what is the better option – to send an invoice, to get a payslip or to get a dividend?

This is a very relevant question, what is actually better?:

– to send an invoice to the company from your sole proprietorship?

– to get a payslip from the company?

– to get a dividend?

The answer depends on the personal income tax you are paying.

Income from payslips and from sole proprietorships is in general taxed in the same way (when using the tax calculation method “personskatteordningen”).

If we look at the dividend option, then the first 54.000 DKK (2019) is taxed 27%. This seems pretty low, since the average personal income tax for sole proprietors and managing directors is 39-43%, and for normal employees around 32-38% (source: The Danish Ministry of Taxation, see link below), but keep in mind that this is after the company income tax was paid.

Here you can read the article by The Danish Ministry of taxation relating to the average tax in 2016 (2017 and 2018 is in the making):

Link to The Danish Ministry of Taxation – average taxes in Denmark for 2016

In previous years it was usually the cheapest option to get a payslip, with an amount up to the limit of the maximum tax bracket (558.043 DKK before AM-contribution in 2019), instead of getting a dividend, but since 2016, then when living in some of the areas in Denmark with a higher local tax, then it is cheaper now to receive a dividend up to the 54.000 DKK (2019) and a payslip for the remaining amount.

Tax percentages however is not the only consideration you need to make.

Also other individual circumstances can have an influence, on what option is the cheapest for you.

In the calculations we did above with dividends, then the total taxes ended up being 43,06% and 48,44%.

These taxes you have to compare with the local personal income taxes in your area, in order to decide what is best for you.

Taxes in Denmark varies a great deal amongst different areas, and you also need to consider AM-contribution and church taxes.

When you have an idea on the expected revenue of your company, then you can calculate your personal income tax here below, by adding salary, revenue of sole proprietorship (if sending an invoice to the company) and dividend, giving you a better understanding on what is the best option for you:

Link to The Danish Ministry of Taxation – calculation of 2018 personal income tax

We will be happy to assist you as well.

Do you have any questions to company income tax or dividend tax?

Please send us an email: info@daniaaccounting.com

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What can you deduct in your taxable income when making larger investments?

There are two different kinds of depreciation: one relates to accounting principles and the other to the tax law. This is the law we must follow when we make your tax declaration, in which a specific set of rules dictate how we calculate depreciation and your taxable income.

What can you deduct in your taxable income when making larger investments?

Let’s look at these rules in context. If you buy an asset for 100.000 DKK, depreciation is handled in two ways. The first is tax depreciation, which is what we refer to when we talk about what you can deduct from your income before you pay tax. If you have 1.000.000 DKK in revenue, for example, and you buy something for 1.000.000 DKK, your revenue will not be 0 DKK. That’s not the case when we talk about depreciation.

In general, there are three different types of tax depreciation: improvements to leaseholds, buying goodwill and equipment.

Improvements to leaseholds
Improvements to leaseholds (in Danish: indretning af lejede lokaler) relates to making improvements to a rented property, including painting, carpeting, etc. – anything that you would not be able to bring with you if you moved.

When you make these improvements, we’ll first add everything together, including VAT if you’re registered for it. Once we have the sum of all the improvements, tax law allows us to deduct 20% of this sum from your taxable income.

So if, for instance, you had 1.000.000 DKK in revenue, and you made 1.000.000 DKK in qualified improvements to a rented shop or office; we can then take 20% of that total, which would be 200.000 DKK, and deduct that as a cost in the first year. If your revenue was 1.000.000 DKK before you made the improvements, then we’d be able to deduct 200.000 DKK in depreciations. Your revenue would then be 800.000 DKK. In the second year, you deduct 20%, and so on, in a linear depreciation, until the entire depreciation has been deducted by the fifth year.

Because you made 1.000.000 DKK and you spent 1.000.000 DKK in that first year, the cashflow would be 0, but the taxable income would still be 800.000 DKK, meaning that you’d still have to pay quite a bit of tax for that year.

That’s something you must think about when you make big investments: Do you actually have the cashflow to make the investment? Dania Accounting can help you draft a cashflow budget, if you’d like to see how it actually works with the tax.

Buying goodwill

The next type of tax depreciation is buying goodwill. Goodwill is something you typically buy if you purchase a shop, restaurant or consulting business, etc., where a portfolio of clients comes with the shop. The word “goodwill” relates to the goodwill of the clients; it means that when you buy this shop, restaurant, etc., there is already a built-in base of loyal customers who were happy with the previous owner’s service or product. That happiness is valued at a price, which is called goodwill.

When we calculate your taxable income, we look at how much you paid for the goodwill shop or restaurant. From this amount, we’re allowed to deduct a seventh of the price that you paid for goodwill in the first year. In the second year, we’re also allowed to deduct a seventh, and so on, in a linear depreciation over the first seven years that you run the shop. After the seventh year, all the goodwill has been deducted.

Equipment

The last type of tax depreciation is for equipment. Equipment runs the gamut from tables and chairs to kitchen equipment, cars, computer systems, software, etc. To calculate the depreciation, we sum up the purchases throughout the year, and from this sum, we’re allowed to deduct 25% of the balance.

Unlike the first two depreciations, this is not a linear depreciation; instead, we must depreciate 25% of the balance, which is called a declining balance depreciation. For example, if you buy a car for 100.000 DKK, when we deduct the tax in the first year, we’re allowed to deduct 25% of 100.000 DKK, which would be 25.000 DKK in depreciation. 75.000 DKK will be the balance left over, which will be an asset and won’t be deducted as a cost. When we deduct the tax in the second year, we’re allowed to deduct 25% of the remaining 75.000 DKK (18.750 DKK), and 25% of the remaining 56.250 DKK in the third year, and so on.

For this example, it will take nine years to deduct the total depreciation. Because it takes so long to receive your tax deductions for equipment in a declining balance depreciation, you must pay attention to your cashflow when making big investments.

Minimum balance

You don’t have to follow the 25% deduction regarding equipment if you have a minimum balance of 13.500 DKK + VAT (2018 rate). If your total equipment balance is below this amount, you can deduct everything at once as a cost in the year that you buy the equipment. Any more than this minimum balance, and you must follow the declining balance depreciation rule, until the balance drops below 13.500 DKK (2018 rate), then you can deduct the remaining amount in total.

Mixed-used equipment

If you buy equipment that’s mixed-use – like a computer or car that you use for business and private purposes – you must split the depreciation between what is deductible as a cost in the company and what is to be considered private.

Cash conversion

The last thing is relevant mainly for restaurants, shops and cafes – businesses where you might take a mortgage from the seller when you buy it. For example, you might buy a shop for 1.000.000 DKK, paying 100.000 DKK in cash, while the seller offers to give you a mortgage on the remaining 900.000 DKK as a loan. If you make such a transaction, we must account for the amount you paid in cash when calculating depreciation and make a cash conversion of these mortgages.

If you buy a shop for 1.000.000 DKK and you pay partially in cash and get the rest as a mortgage, please ask us how much you can depreciate before you create a budget, because a certain amount must be deducted, and this amount is dependent upon the rate the mortgage was issued to you.

Do you have any questions?

Please send us an email: info@daniaaccounting.com

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What do we offer large companies?

We assist with all the normal tasks, one of which is the VAT. Most large companies declare their VAT every three months; some, every month if they have big sales. We declare the VAT if you need to claim a refund or if you need to pay the VAT. If we’re paying bills, we enter the VAT into the netbank for payment. Depending upon the agreement we’ve made with you, you must either authorize the payment first or we can authorize it in the internet banking system. We normally prefer the first option.

Information about our accounting services for large companies

Dania Accounting provides quality service to both small and large companies, including accounting services, VAT declarations, tax returns, annual reports, payrolls and budgets, and more. This article will focus on the large companies, who make up a large portion of our client base. We’ve served more than 1500 small companies during our time, so we have a vast level of experience, which is available to you.

Annual Audit

First of all, the majority of large clients have an annual audit, which means they have an external auditor in addition to the normal accounting. We help prepare the balance for audit when the year is over. We’re also normally responsible for all the communication between the client and auditor when we’re preparing this balance.

Different auditors have different requirements; some are very strict in terms of documentation while others are more relaxed. Normally, we initiate the preparation with a meeting to define the tasks we’re responsible for and those the auditor is responsible for and, based upon that, we start preparing the annual report documentation. On average, it takes between 10-20 hours per year to prepare for audit, which is an additional cost to the regular services we provide for our client.

Some of the larger clients no longer require audits. The rules in Denmark have changed; annual audits are no longer obligatory depending upon the following criteria: the size of your business measured in sales, along with the balance sum – the total sum of your assets – as well as the amount of employees you’ve had during the year. If you are within the legal requirements, you can choose whether or not to have an audit.

If you opt out of an audit, we can prepare the annual report and tax declaration every year. We can do this for you if you are a sole owner of a limited liability company, several owners, or if you’re part of a structure of one or more holding companies that owns the company we’re doing the accounting for.

If you’re required to have an audit, you must hire an external auditor, since we do not audit our own work.
We can help you finding an external auditor if needed.

Public Registry of Owners

We assist with updating the public registry of owners. This is an online registry in Denmark where information for all business owners is available.

Shareholder Meeting Protocols

We assist with the protocols after you’ve had a shareholder meeting. An auditor can also help assist you with these protocols.

VAT

Booking Supplier Invoices

Basic accounting services consist of booking all the supplier invoices, which we receive on a daily basis from the client. Most of our clients receive invoices as a PDF from their suppliers by email, which they can then forward to the accounting system. We have access to them and can book from there.

If your supplier doesn’t send invoices via email, then we normally agree upon a weekly schedule by which the client scans all the invoices and sends them to us in PDF, so we can book them in the system. Very seldom do we offer a service where we drive to the client to pick up invoices; it’s simply too time-consuming and expensive.
When we book the supplier invoices, we also book all the data related to the payment, which includes the supplier bank account, the invoice, the amount, the payment ID (if specified), etc. All this data is registered into the accounting system, and we’ll use all this information when we make payments for the clients.

Small Receipts

In addition to supplier invoices, we also book all small receipts – those that you might rack up from buying random supplies, like gas for your company car, pens, etc. We don’t have to transfer these amounts to your net bank, because they’ve already been paid either in cash or by credit card, but we do need to book them. We receive these either by scan (PDF) or via a smartphone photo emailed to the accounting system in JPEG (as a normal picture).

Bank Account Reconciliation

We also reconcile the bank accounts, and we can do this for as many bank accounts as you need, including forex (foreign exchange) accounts. When we reconcile the bank accounts, we match the sales invoices with payments from your clients and of course the supplier invoices with payments you’ve made, so we’re able to print a statement on both your customers and your suppliers at any given time.

If you have any cash transactions – say, for instance, you own a shop and there’s a daily cash report – that’s also something we can reconcile. You must have an employee who counts the cash in your shop at the time of closure every day, and we can then help you write the cash report, itself, which is a legal requirement in Denmark.

Monthly Review

After we’ve booked the invoices, we offer our larger clients a monthly review. We can do this by telephone or a Skype meeting, where we can share the screen. During the review, we look at the balance together, account to account, and we discuss any changes needed or client preferences.

Normally, we do this once a month, but it could also be done every quarter or not at all. It’s a good idea to opt for this service, because accountants are humans and can make mistakes, so it’s better to spot them, fix them, avoid misunderstandings and decide how to book them accurately in the future. If you have an accountant booking, Jonas (our employee in charge of larger clients) will speak to the accountant and discuss the review with the client. The time spent on this review is between 2-3 hours per month, which is a good investment.

Payrolls

In addition to all this accounting and reviewing, of course there are payrolls. We can prepare the payrolls either in Bluegarden or in Danløn, which are the two most popular payroll systems in Denmark. If you have fixed salaries, preparing the payroll is normally quite easy; but if you have hourly paid employees, we must discuss how to calculate the gross salaries and how to calculate and track holidays, sick days, etc. To calculate salaries, it normally takes between 1-2 hours per month if you have 5-10 employees.

For holiday accounting, you should create an employee list in excel in order to document how many days of holiday they have left and how many days they’ve used. In addition, if you’ve had any employees who’ve been sick or you have a refund agreement with the local city hall (offered typically for companies who hire a refugee or someone who isn’t able to work at 100% efficiency), we can handle these areas of accounting for you.

Employee Contract Templates

You must have employment contracts with all your employees. We’re not a legal office, so we can’t create these contracts for you, but we do have access to a number of templates that you can use as a base for your employment
contracts.

Sales Invoicing

Another service we offer is sales invoicing. Typically, we spend 2-4 hours invoicing per month, but this largely depends on how many invoices the client has. This is optional, and sometimes it’s a better idea for the client to do it, rather than hiring the invoicing out to us. For instance, if the sales invoices are very complex, it could take more time for the client to describe the invoice to us than it would for them to complete the invoicing on their own. It also depends on the size of the company.

If you do opt to hire us for this service, one thing that helps us greatly is to record the current employee who does the sales invoicing while he/she conducts a normal invoicing. This will allow us to see your invoicing methods, how you calculate the gross amount, etc. We could also share a screen and ask the necessary questions over Skype, or you could choose to write clear and detailed instructions for us.

If you use e-conomic, you have an option to make all the invoices as templates, so you can approve them before we send them to the clients. This is normally a good idea, especially in the beginning, until we’re 100% sure how to calculate the sales invoices.

Additionally, there’s a function for subscription clients in e-conomic. Some of our customers sell services that are good for a subscription basis, so they’re typically invoiced the same amount every month. The functionality available in e-conomic allows you to invoice your clients automatically. If you only have 10-20 clients, it doesn’t really matter, but if you have 100+ clients, you can save a lot of time using this feature.

Billing & Late Payment Reminders

We can send normal statements on a weekly or monthly basis, depending upon your preference. In addition to invoicing, we can also assist you in sending reminders to clients when they’re late with payments. When we send the reminders, we’re able to add interest and a fee for sending these reminders.

Projects

With e-conomic, we’re also able to handle projects (Dinero and Billy’s Billing don’t have project features, so this option is primarily for e-conomic clients). If you work with your clients in a project environment, then when we book your supplier invoices, we’re able to pin them to a specific project. We can also ensure that when you invoice your client on an individual project, all these costs will be added to the project. You’re able to set a price per hour, so that when you invoice your client in the project module, your invoice includes all the costs and hours that you have spent.

Supplier Service (LeverandørService – Automatic Payment System)

There’s also an automatic payment system, called supplier service (LeverandørService). This enables you, as a supplier, to withdraw money directly from your client’s bank account. You could withdraw weekly, every two weeks, every month – whatever’s been agreed. Your client gives you permission to withdraw the money and then you have a system that must be operated by an accountant. After we’ve done the sales invoicing, we’re able to order these payments from your clients, which is a nice feature that can help with cashflow, especially if your clients are late in getting their payments in.

Budgeting

Some clients need budgeting done for themselves, management or investors. A few of our clients need help with their cashflow budget, which we normally create on a monthly basis.

An app inside e-conomic called Budget123 exports the numbers from e-conomic into the budget program.

e-boks

We have something in Denmark called an e-boks, which is where you’ll receive all correspondence from the government and the tax office – everything from tax declarations to reminders, etc. They no longer send letters through the regular post. When you have access, you can give us a proxy, so we can log in and check if there’s any mail or anything we need to react on (www.e-boks.dk).

Payment of Bills

If paying bills is something you want to delegate to us, we need access to your internet banking system. You must check with your bank that you’re able to import payments made from a financial system which come in a comma separated file (csv file); not every bank has this feature. We can take the information that we enter into e-conomic and, when we book the invoices, we can export it from e-conomic and import it straight into your internet banking system. Doing so saves a lot of time and eliminates risk for mistakes, since we receive everything automatically. Normally, this takes 1-2 hours, which we do weekly for most of the clients. We’re also able to contact suppliers directly if invoices are missing.

Checking of Booking

Normally, when you hire an accountant from us, you get a full-time or part-time accountant, depending upon the agreement we make. We do high quality work, but everyone makes mistakes, so we recommend that some controlling is added. Every accounting division has a controlling function, and you should too. Normally, checking takes 10% of the time that you have an accountant booking. For instance, if you have a full-time accountant, working 160 hours, then we’d spend 16 hours checking.

It’s not an accounting function; it’s an actual controlling function, where we try to eliminate mistakes, identify problems, etc. The mistakes are not always related to amounts and VAT; they can be general things – things that could be done smarter, things that we must change in order to meet the audit requirements, etc. Unless you know what to look for, you’re not going to spot the mistakes yourself, so we highly recommend this controlling function.

Old Bookings – corrections

Many clients who come to us were not satisfied with their previous accountant, so when we start booking, many times we’re required to look at the old bookings, which is charged separately. It’s difficult to estimate how much time reviewing old bookings will take, because we don’t know how many mistakes we’ll find, but if you can account for how many bank transactions and invoices there were, we’ll be able to calculate a fair estimate on the cost.

Payments to us

When you enter into an agreement with us, the fine print includes one month of service as a deposit, which is something you pay prior to us starting. We invoice you monthly in advance, so in the beginning, you’ll receive an invoice for the deposit and an invoice for the upcoming month of work.

There is a termination period, which is normally three months to the end of a calendar month. So if you enter into an agreement with us on September 1st, for example, if you want to get out of the contract within that first month, the agreement would still run for the full month of September and three more months – October, November and December. You’d be able to get out of the contract on December 31st.

When we agree on a fixed amount of hours per month, holidays, sickness and public holidays, etc., are all included. If an employee is sick or there’s a holiday, we’ll do overtime to make up the bookings when the employee returns. The number of hours we’ve agreed upon are fixed; you pay a monthly fixed flat fee rate, unless we’ve agreed on variable invoicing.

We normally regulate the prices once a year in January. Historically, you should expect 5-10%; the reason being that we must regularly increase employee salaries to keep them working for us. If we increase the price more than 10%, it’s related to something other than the general index increase. Maybe you require more/less hours, for example, in which case we need to talk about that and regulate the agreement.

Do you have any questions to our accounting services for larger companies?

Please send us an email: info@daniaaccounting.com

Listen to our podcasts, watch our videos, or visit us on social media, and learn more about us, tax, vat, how to start a company and much more:

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Can you deduct your transportation from your home to your company?

To determine whether or not you can deduct your transportation from your home to your company in your taxable income (this type of deduction is called “befordringsfradrag” in danish), then you need to calculate the total amount of kilometers, that you drive every day from your home to your company.

Can you deduct your transportation from your home to your company?

If this roundtrip distance is 24 kilometers or less, then no tax deduction is given.

You must exceed 24 kilometers roundtrip per day, in order to get a tax deduction – in other words – the distance from your home to your company, must be more than 12 kilometers one-way.

If your roundtrip distance is more than 24 kilometers, then the tax deduction given in 2019 is 1,98 DKK per kilometer for the 25th kilometer and up to 100 kilometers.

If you exceed 100 kilometers per day, then the tax deduction in 2019 drops to 0,99 DKK per kilometer, for each kilometer driven above the first 100 kilometers.

These rates change every year, so check the updated rates on SKATs website every year:

Link to rates used in 2018 and 2019

One way to document the amount of driven kilometers, is to download an app to your phone, so that you can show the tax office (in case of questions), how many days you actually made the trip from your home to your company.

You can also write it down on paper, but the apps can be much more convenient.

This app here is quite popular in Denmark:

Link to app in the App Store

If you drive twice a day from your home to the company, you may be eligible for a double tax deduction, but again the documentation must be there. This double tax deduction may be relevant to those, who f.ex. own a restaurant and drives in the morning to open the restaurant, and again in the evening to close it.

Example:

An example on how to calculate the transportation deduction (called “befordringsfradrag” in danish):

A person drives 40 kilometers from his home to his company.

For the first 24 kilometers no tax deduction is given.

He drives 40 kilometers to the company, and then 40 kilometers again, when he drives home = it gives a total of 80 kilometers round-trip per day.

From this we remove 24 kilometers (which are not tax deductable) = 80 kilometers – 24 kilometers = 56 kilometers

He gets 1,98 DKK per kilometer (2019 rate) in tax deduction, so his total deduction per day is: 56 kilometers * 1,98 DKK = 110,88 DKK per day in tax deduction.

This amount is to be declared on the yearly tax declaration, in order to have effect on the tax.

You can get help calculating your tax deduction here from the tax office (2018 rate is used)

Do you have any questions about driving to work?

Please send us an email: info@daniaaccounting.com

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What can you deduct when driving a van for your company?

A van used for transporting goods for your business may be eligible for deductions, but the rules are different, depending upon if you purchase or lease the vehicle.

What can you deduct when driving a van for your company?

A van used for transporting goods for your business may be eligible for deductions, but the rules are different, depending upon if you purchase or lease the vehicle.

Purchasing a van

When you buy a van, you must decide whether you’ll use the van 100% for business or if it will be mixed-use.
A mixed-use van is used for private and company purposes.

Buying a van – used 100% in the company

VAT

You will receive an invoice when you purchase a van which may or may not include VAT. If it’s a new car, the invoice will normally contain VAT. If it’s a used car, sometimes there is no VAT – if the car was previously owned by a private person, for instance.

If you use the car 100% for business, and you have an invoice that includes VAT, you can deduct the full VAT in your accounting. The requirements are that you use the car 100% for business purposes and that you can actually see VAT on the invoice.

When you buy a car from a private person, there is normally no VAT. If you make a contract with this person, pricing the van at 50.000 DKK, for instance, then you cannot just calculate the VAT; it must appear on the contract if you want to make the deduction.

Sale of the van

If you’ve deducted VAT when you purchased the vehicle (which you only do for 100% company use), you must also add sales VAT when you sell the van. If you have a mixed-use van, you needn’t add VAT when you sell it, as it wasn’t included in your purchase. You will be taxed on a profit from selling the van, or you will get a tax deduction if you lose money, when selling the van.

Tax

When it comes to tax, if you use the car 100% for business, Dania Accounting will first deduct the VAT, and the remaining amount will be booked in your company as an asset. If you buy a used van with no VAT, we deduct 25% of the value of the car as depreciation.

Buying a mixed-use van – partly used in the company, partly used for private purposes

VAT

If you use the car for business and private purposes – whether 1% private/99% business or 50%/50% – , then you are not allowed to deduct any VAT on the purchase. Private use excludes you from the VAT deduction on the purchase. So even if you bought an expensive van with 30-40.000 DKK of VAT shown on the invoice from the car dealership, you are not allowed to deduct anything if the van is mixed use.

Tax

The tax rules is a little different from the VAT rules.
When you buy a used van or mixed-use van where you’re not allowed to deduct any VAT, then the full amount of the van’s purchase will be booked as an asset and a tax deduction is calculated from this amount.
If you buy a van only used for the business, then when Dania Accounting does the annual report, we are allowed to deduct 25% of the van’s value as a cost (the first year we depreciate 25% of the purchase sum, the second year 25% of the remaning amount after the firsts years depreciation, the third year also 25% of the remaining amount after the depreciation done in the second year etc. – until everything is depreciated).
If you buy a mixed-use van, we deduct 25% of the value of the car as depreciation, and then calculate a partial tax deduction, according to how often you use the car for your business. If you use the car 50% for private purposes, for instance, then we first calculate the 25% depreciation, 50% of that amount will be the tax deduction from the value of the car.

Leasing a van

VAT

The rules for leasing a van are different. If you use the van 100% for business, then you are allowed to deduct 100% of the VAT. If you use a leased car for both private and business purposes, you’re only allowed to deduct a third of the VAT shown on this invoice.

Ongoing costs for a van

There are also ongoing costs when operating a van, such as gas, diesel, insurance, road tax, etc. The rules are if you use the car 100% for business, then you are allowed to deduct the VAT of your costs. Be aware that not all costs have VAT; parking, insurance, and road tax, for instance, are normally exempt from VAT. The costs that qualify are normally gas or diesel, service on the vehicle, bridge crossings, etc. These rules also apply to use of the van for mixed purposes. Even if the van is used 99% for personal use, you’re still allowed to deduct 100% of the VAT for the ongoing costs.

Booking bills or using a fixed “per kilometer deduction” as costs

In terms of ongoing costs, if you aren’t good at saving bills, then every time you forget to input your gas/diesel bills in your accounting, you will lose a VAT and tax deduction everytime you forget to save a bill and give to us. As an alternative, you can choose to use another set of rules, which involve using a fixed amount for cost per kilometer driven. It’s easier if you can’t keep track of your bills, but depending on the type of van you own or lease, it may not financially work in your favor.

If you do choose to go the fixed amount per kilometer route, we recommend that you download an app on your smartphone to keep track of how many kilometers you drive. On the app, you can click whether it’s a private trip or a business trip. At the end of every month, you’ll have an accurate report which will serve as the document we book in your accounting and will track your travel if you have a tax inspection.

When you’ve supplied the report to Dania Accounting, we can calculate a deduction. In 2018, the deductible amount is 3,54 DKK per kilometer for the first 20.000 kilometers you drive each year. If you exceed 20.000 kilometers, the amount drops to 1,94 DKK per kilometer. The 3,54 DKK per kilometer includes everything except parking, or when you use a ferry or cross a bridge. You can add these extra costs (parking, ferry, bridges) to your income tax deduction, but you must save the bills for these, if you want the income tax deduction.

Is it better to use the bills or the kilometers?

This is difficult to answer, because first you must calculate how much the deduction would be if you use the bills on the car to compare it to the amount you can deduct with the kilometers driven. So to answer this question, you must know the price of the car, how many kilometers you drive per year, the kilometers/liter of gas or diesel, etc. In order to recommend bills over kilometers, we’d need a number of details to give a proper estimate.

Do you have any questions about cars and deductions?

Please send us an email: info@daniaaccounting.com

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How to deduct your home office in your personal income tax

First off, in order to deduct your home office in your personal income tax, you must change the physical appearance of the office. The tax office in Denmark will ask what you have in this home office. For example, if you have a three-room apartment and you use one of the rooms for a home office, in order to receive a deduction, it must be physically changed. If the office’s physical appearance has not changed, you cannot take a deduction.

How to deduct your home office in your personal income tax

Change the appearance of the home office

However, there is no 100% clear definition of the changes you must make, and different people at the tax office may have differing interpretations of the specifications. To one tax inspector, “changing the physical appearance” may not mean simply putting in a desk, office chair, a bookshelf and books related to the business. Machines or special furniture that are not used in a private residence could be considered a physical change. It could also be actual installations you need to make – like in a mechanic workshop – than can change the physical appearance of the room. However this is seldomly the case for a typical client. Whether or not it looks like a normal office, tax inspectors may decline your deduction, depending upon their own personal interpretation.

Use of the office

In addition, you must use the office a certain length of time in order for the deduction to be approved. It’s not enough that you spend a couple evenings a week in the office. Although, again, there isn’t a 100% clear definition, 5-8 hours per days should be sufficient. Again, experience with the tax office has shown that approval is largely dependent upon the inspector.

If you are renting your home

Your deduction will be different if you rent your apartment/house versus owning it. If you rent, we look at the surface area of your lease, and then we calculate how much percentage of this area is used for the business. In order to calculate this, you can take a drawing of your lease and mark off how much of the space is actually used as an office in order to determine how much to deduct. For instance, if you’re renting a 100 square meter apartment and 10 square meters are used for the office, 10% of your lease is used for the business.

Monthly rent & utilities

We must then look at the costs (rent, electricity, heating, etc.) related to your apartment/house to determine how much to deduct. In the example above (with a 100 square meter apartment and a 10 square meter home office) you’re allowed to deduct 10% in tax, and you’re also allowed to deduct VAT (10% of the VAT) if the home office is 10%. If your home office is bigger, then your deduction will also increase. For instance, if you use 25% of your home for the business, then you may also deduct 25% of the electricity bill, 25% of the heating bill, and 25% of the VAT. The deduction is always relative to the business usage of your apartment/house.

Water

Water is another expense that may only be approved for deduction if its use directly relates to the business. For instance, a hairdresser might use the home office to cut a client’s hair, so water usage would normally be approved in this scenario. Once you’ve gathered all the relevant bills, you must deduct the percentage of the home office from the total expenses; in our example from above, 10%.

If you own your home

When you own a property in Denmark, you pay a mortgage to the bank, and you also pay interest on that mortgage. In terms of these costs relating to the mortgage itself, you cannot make any deductions for your home office, as the mortgage and interest are considered a private cost. However the mortgage interests are deducted in your personal tax already.

Property tax

In addition to the mortgage, you also pay a property tax as a owner, which is called “Ejendomsskat” in Danish. You normally have two instalments to pay annually. When it comes to property tax, if you use less than 10% of your property for the business, then you’re not allowed a deduction. If you use 25% (and above) of the property as home office, you can take a deduction of the property tax you’ve paid in your company as a cost. For example, if you’ve paid 10.000 DKK in property tax, and you use 25% of your property for a home office, then you can deduct 25% of the 10.000 DKK, which is 2.500 DKK (this will be a cost for your company then).

Capital gain deduction

The tricky part is if you use 10-24% of your property for a home office, then you can only deduct this part of the property tax as a capital gain deduction. This deduction is not given in your personal income or in your company’s revenue, but rather as a capital gain deduction, which is a special field on the tax declaration.

In Denmark, when you do this capital gain deduction, you don’t get a 100% deduction but more like a third, so if you pay 50% in tax and deduct 1.500 DKK as a capital gain deduction, then you’re not going to get 750 DKK in tax refund, because the 1.500 DKK will not have that much power as a tax deduction. It’s only measured at around a third, so the 1.500 DKK becomes a tax deduction of around 500 DKK. If you use 15% of your property as a home office and you pay 50% in tax, then you end up receiving a tax discount of 250 DKK.

Property value tax

Another tax you pay in Denmark for your property is called property value tax – “Ejendomsværdiskat” in Danish. This is not something that you pay individually; it’s included in the normal income tax you pay. You can always deduct a partial amount of property value tax if you have a home office; even if you use only 5% of your home as a home office, you can still receive a 5% partial deduction for this tax.

On the tax declaration, you must write the percentage of your home you use for a home office and how many days you’ve had it. When you do that, then you’ll automatically receive a tax deduction. Keep in mind that if you’re only registered for owning 50% of the property then your husband or wife should do the same, because they’re also eligible to receive this discount.

Maintenance

If you’re an owner, the maintenance on your apartment or your house (painting, fixing a heater, etc.) is the next potentially relevant deduction. If you use less than 10% for business, then you’re not allowed to take any deductions on maintenance, but if you use more than 10%, then you’re allowed to take a partial deduction equivalent to the usage for business. So if you use 20% of your property for business, for example, and you need to paint the office, then you’re allowed to take a 20% deduction for both the VAT and the tax. You may take a partial deduction for everything related to maintenance.

Utility bills

We also deduct the utility bills (insurance on the house, chimney cleaner, etc.) as we would for rentals, according to the percentage used for business. However, as an owner, the tax office may only approve these deductions if you use around 25% or more of your home as your home office. Again, this depends on the inspector. Electricity and water have separate rules and are not included in this type of deduction.

Electricity

For electricity, normally the tax office accepts a partial deduction, regardless of the percentage you’re using for business. So if you’re using 10% for business, normally they’ll approve a 10% tax deduction and VAT deduction of your electricity bill. No minimums here.

Water

For water, the rules are similar to rentals. Normally they’d like to see that you actually use water for your business, and the home office must be at least 10% of the property in order to deduct the water bill. You also receive a partly VAT deduction, and you can deduct a certain amount of every cubic meter of water you use (an extra VAT deduction). Up until now, it’s been 6,18 DKK/cubic meter of water (2020 rate), deducted directly on the VAT declaration. But this can change, so make sure you have the updated amounts.

New installations

You’re not allowed to deduct new installations for your business (new air conditioning unit, water heater, oven, etc.).

If you have a home office, have a chat with us about it. Very few clients actually fulfil the criteria of making a physical change to their apartment or house, which is the first challenge.

Do you have any questions regarding your home office?

Please send us an email: info@daniaaccounting.com

Listen to our podcasts, watch our videos, or visit us on social media, and learn more about us, tax, vat, how to start a company and much more:

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