How to pay VAT or get a VAT refund in 2023
This blog will cover how to pay VAT or get a VAT refund in 2023.
VAT means “Value Added Tax”.
The VAT rate in Denmark is 25% in 2023.
We do not have differentiated VAT rates in Denmark.
VAT is a form of sales tax that most Danish companies must add to their sales.
This means that the company’s clients pay this sales tax when collecting payments for the sales of services or products.
The companies are then asked to pay the collected sales tax to the Danish Tax Agency periodically.
Instead of using the word “sales tax”, we call it sales VAT in Denmark (or “Salgsmoms” in Danish).
Before paying the sales VAT, companies in Denmark can offset the VAT they have paid to other companies for purchases of services and products.
We call this “purchase VAT” (or “Købsmoms” in Danish).
That way, the companies pay only the difference between the collected sales VAT and the paid purchase VAT to the Danish Tax Agency.
So, in reality, they only pay the VAT on the added value.
Thus the name “Value Added Tax”.
Companies will receive a refund if the purchase VAT exceeds the sales VAT.
Not all companies should register for VAT
It is essential to know that not all companies need to register for VAT.
The VAT registration requirements depend on the annual revenue and also the industry.
If your revenue is expected to be less than 50.000 DKK during 12 months, you do not need to register for VAT.
Registering a business without a VAT registration is called a “PMV”, which translates to “Small Private Business”.
A PMV still needs to comply with tax and accounting rules.
So the only difference is the lack of VAT registration.
Be aware that exceeding 50.000 DKK in sales will also result in retrospectively paying VAT for the previous months.
Therefore it is not advisable to register as a PMV if you expect more than 50.000 DKK at some point.
You must typically register for VAT if your revenue exceeds 50.000 DKK during 12 months.
However, some industries are exempt from the requirement of VAT registration.
Here are examples of services and products exempt from VAT registration:
And many others.
Not all VAT-applicable sales trigger sales VAT
Even though your industry is VAT applicable, and you must register for VAT, some types of sales are exempt from VAT.
Generally, you must apply VAT to the sales invoice if you sell from a Danish company to a Danish client.
If your client is outside Denmark, there are situations where the sales should not be added VAT.
This is f.ex when a Danish VAT-registered company sells to an EU VAT-registered client outside Denmark.
Then you can issue a sales invoice without adding VAT; you need to add the text “Reverse charge” to the invoice together with the VAT registration number of the client.
You must also verify online that the client is registered for VAT.
In most situations, when you sell outside of the EU to B2B clients, you can issue your sales invoice without VAT.
There are, however, exemptions to this rule.
One exemption is when a client uses marketing services in Denmark provided by a Danish company.
In this case, the Danish company must add Danish VAT to the invoice even though the client is outside the EU.
The client can then apply for a VAT refund in Denmark later.
So always clarify how you should handle VAT for your clients first.
Your accountant can help identify the situations where you should not add VAT to the sales and when you should add VAT.
Not all costs include purchase VAT
The same applies to costs.
Some costs do not contain VAT.
Other costs contain VAT.
And some costs are invoiced to you using reverse charge rules when purchased outside of Denmark.
Your accountant can help identify the costs where you cannot deduct the VAT from the costs.
Often reverse charge rules are applied for cross-border sales of services and products between companies.
With reverse charge rules, you can transfer the obligation to settle the VAT from the seller to the buyer.
This simplifies trading across borders.
In general, if both the seller and the buyer is registered for VAT, then the reverse charge VAT does not require anyone to pay the VAT.
But it should still be reported correctly to the Danish Tax Agency.
If you are not registered for VAT, then you often will need to calculate and also pay the VAT, which comes from reverse charge invoices received from suppliers.
Special rules regulate reverse charges, so tell your accountant if you sell to other countries and let the accounting assist in handling your reverse charge invoices.
How often is VAT declared and paid to the Danish Tax Agency
For new and small companies, VAT is typically declared and paid quarterly.
Declaring and paying VAT monthly is possible, but we do not recommend it since VAT is a free credit line for the company, assuming your sales VAT exceeds purchase VAT.
Also, some companies declare and pay VAT two times per year.
This can happen when the revenue is below 1 million DKK for a full calendar year.
The Danish Tax Agency can then decide to change the VAT period.
You can see your current VAT period by login into SKAT Erhverv and printing your registration document for your company.
What is the first step to calculating VAT
First, as accountants, we should receive all your sales and costs invoices and your company bank statement.
Then we enter everything into your accounting system and start calculating the VAT.
When we finish our work, we print a VAT report and declare the VAT to the Danish Tax Agency.
Paying the VAT
If you have to pay VAT, we’ll send you a payment ID and the amount to pay.
You need to create the payment in the bank and pay the VAT on time.
Unless an agreement with your accountant about making payments is in place.
VAT deadlines in 2023
|VAT deadlines (Quarterly)||1st quarter of 2023||2nd quarter of 2023||3rd quarter of 2023||4th quarter of 2023|
|VAT deadlines (Semi annually)||1st half of 2023||2nd half of 2023|
What happens if you pay VAT late?
In cases where you have to pay VAT but don’t have the money to pay for it all at once, you will owe the Danish Tax Agency VAT.
Interests will be added to the VAT debt each month.
Applying for a payment plan to settle the VAT over time with the Danish Tax Agency is possible.
That is done on SKAT Erhverv.
Retrieve a VAT refund
Businesses retrieve VAT when they have purchased more than they have sold with VAT, resulting in a net amount reimbursed by the Danish Tax Agency.
How long does a VAT refund take & where will you receive the refund
After 1-2 weeks, the money is transferred to what we call in Danish a “NemKonto”.
What is a NemKonto?
A NemKonto is a term used for the bank account used by the Danish Tax Agency to refund VAT and tax.
When you create a Danish bank account for your business, you have a regular business account, which will also serve as your “NemKonto” account.
The Danish bank should automatically allocate this as your NemKonto.
It is possible to verify that your bank has designated your company bank account as your NemKonto.
You can also call your bank to ask if they’ve remembered allocating you a NemKonto.
Can I use my Revolut or foreign bank account as NemKonto?
If you use Revolut or another online banking system, you must apply to use this account as your NemKonto.
That can be done by filling out this form and getting two people to sign as witnesses: