Danish tax representation

Depending on the company's geographic location, it may be necessary to appoint a tax representative. In some European countries, such as Denmark, non-EU companies that need to register for VAT must have a Danish tax representative. For companies operating outside the EU and offering services or selling goods in Denmark, the establishment of a Danish fiscal representative is mandatory.

In Denmark, the role of a tax representative includes overseeing VAT issues and sharing responsibility for Danish tax liabilities. In addition, the fiscal representative in Denmark will be responsible for filing VAT returns and representing the company in its dealings with the Danish tax authorities. This makes it easier for foreign companies to comply with local tax regulations and minimizes the risks associated with possible non-compliance.

We offer comprehensive services for managing VAT returns, complying with local regulations and dealing with Danish tax authorities. Take advantage of our experience to simplify your tax processes and avoid the risks associated with possible non-compliance.

What does tax representation consist of?

With a tax representation service, one company can act on behalf of another that wants to import its products into the European Union. Such tax representation allows companies to focus on developing their presence in the EU market. Companies gain the ability to effectively manage tax aspects, allowing them to better focus on building a strong presence in the European Union.

A fiscal representative in Denmark is responsible for various activities, including the following:

- Registering the foreign business for VAT in the host country and ensuring compliance with local tax regulations.

- Managing VAT returns, ensuring their proper preparation and submission.
- Timely submission of VAT amounts due to the relevant tax institutions.

- Maintaining accurate and detailed records of all transactions and VAT activities for compliance and audit purposes.
- Facilitating the use of the reverse-charge mechanism, shifting the responsibility for VAT payment from the seller to the buyer, where applicable.
- Acting as the primary contact with local tax authorities, managing all communications, including responding to queries and handling audits.
- Monitoring compliance with local tax laws, staying updated on regulatory changes, and advising the business accordingly.

- Complying with European reporting requirements and submitting required Intrastat declarations on a regular basis.

Limited scope tax representation focuses on servicing companies from outside the European Union that import goods and generate profits from their sale. This type of representation requires only one license, which simplifies the eventual process of adding new clients. As a result, the management of fiscal representation is more flexible and efficient.

This type of vat representation benefits a wide range of industries, including both maritime and air transport. Limited fiscal representation services are particularly popular among companies involved in importing goods into the European Union. Such a system allows goods to be imported into the EU without immediately having to pay VAT on the import, which significantly improves the liquidity of businesses.

For companies importing goods into Denmark, general fiscal representation serves as an essential solution, especially when limited fiscal representation is not an option. Such cases usually arise when transactions involve other EU Member States or when goods are imported from outside the European Union.

To facilitate this process, the Danish tax authorities issue an Article 23 permit, enabling companies to apply the reverse charge mechanism to VAT on imports. This means that VAT does not need to be paid immediately upon importation but can instead be settled in the VAT return. However, this permit is only available to non-Danish companies that have designated a general fiscal representative.

VAT registration obligations in Denmark

If a company's annual revenue does not exceed DKK 50,000, VAT registration in Denmark is not mandatory. Danish companies that plan to reach this level of turnover should register for VAT no later than 8 days before the start of actual operations. If a company's revenue exceeds DKK 50,000 and it does not yet have VAT registration, it must do so as soon as possible. Otherwise, the company risks penalties for failing to meet its tax obligations. Once registered as a VAT taxpayer, the company will be required to regularly file VAT returns and comply with all related regulations and administrative obligations.

The obligation to register for VAT in Denmark arises in several key situations:
1. Importing goods to other EU countries through Denmark: Companies importing goods that are then transported to other EU countries must register for VAT in Denmark.
2. Trade in goods and provision of services in Denmark: If a business trades goods or provides services in Denmark, VAT registration is required.
3. Receiving reverse-charge services by non-VAT companies: Businesses that are not registered for VAT but receive reverse-charge taxable services must also register.
4. Organization of live events and provision of taxed services: Companies that organize live events or provide taxed services are required to register for VAT in Denmark, according to EU regulations.
5. Direct-to-consumer (B2C) sales by foreign companies: Foreign companies that engage in direct-to-consumer (B2C) sales in Denmark, exceeding the intra-Community sales limit and not using the One-Stop Shop (OSS) VAT system, must register for VAT in Denmark.

Foreign companies can fulfill their obligation to register for VAT in Denmark by using the form available at virk.dk. It is also important to check whether a specific business outside Denmark that offers taxable goods or services will also need to register as a non-resident VAT payer. According to the EU's VAT directive, businesses from abroad must report all taxable transactions and account for the VAT amounts due, which entails registration. Once the registration process is complete, a Danish VAT number, known as a DK-nummer, will be sent to the designated mailing address.

In Denmark, the timing for VAT declarations is determined by a company's turnover. Businesses with a turnover exceeding 50,000,000 DKK are required to file VAT returns on a monthly basis, with submissions due by the 25th of the month following the end of the settlement period. For companies whose turnover ranges between 5,000,000 DKK and 50,000,000 DKK, VAT declarations must be submitted quarterly, specifically on the first day of the third month after the end of each quarter. Those with a turnover below 5,000,000 DKK need to file VAT returns semi-annually, aligning their submission deadlines with the quarterly reporting dates.

Unlike many other EU countries, Denmark does not implement any intermediate reduced VAT rate. Denmark features two VAT rates: a standard rate and a zero rate. The standard VAT rate in Denmark is 25%, which applies to all goods and services not qualifying for the zero rate. While the VAT system in Denmark remains uniform without reduced rates, certain goods and services benefit from a 0% VAT rate, which is unusual compared to other EU nations. This zero rate is applied to several sectors, including newspapers and magazines published more frequently than monthly, and international and intra-community transportation of goods and people.

VAT representative in Denmark

Foreign companies have the opportunity to enter the Danish market through tax representation in Denmark, eliminating the need to invest in setting up a local corporate structure and managing separate accounting procedures. In this way, they avoid the costs and complex formalities associated with physically establishing a business in Denmark. Danish tax representation also allows simplification of VAT procedures, making it easier to manage tax liabilities. In addition, this form of business allows quick access to local markets and better compliance with regulations, without the need for a physical presence in the country.

To operate in Denmark, non-European companies must use the services of a Danish VAT representative, since direct VAT registration in Denmark is not possible. Such a representative represents the outside company in its dealings with the Danish tax authorities. They are responsible for ensuring full compliance with VAT requirements, including those that may not be known to the customer. By appointing a fiscal representative, the outside company avoids the obligation to pay corporate tax. The use of vat representation services not only makes it possible to comply with legal requirements, but is also a simpler and more economical alternative compared to setting up a physical presence in the form of a branch or subsidiary.

In Europe, companies do not have to appoint a fiscal representative located in Denmark, but have the option of delegating an agent to handle tax matters with local authorities, which simplifies their cooperation. In such cases, a bank guarantee is not required. Nonetheless, the responsibility for proper VAT accounting rests entirely with the company.

Before a VAT representative agrees to represent your interests, they may require you to provide financial security, such as a deposit or bank guarantee. Such measures are designed to protect the representative from potential risks associated with improper tax settlements. In addition, financial security can also facilitate smoother representation procedures while providing greater certainty regarding the coverage of potential tax liabilities.

Working with non-European companies that do not have a danish fiscal representative often faces difficulties due to risk concerns. Suppliers, customers and trading platforms from Europe regularly choose to refuse to work with such entities, considering the lack of a local agent to be too much of an unknown for their business.

In addition, the lack of a tax representative located in Denmark can lead to serious problems, such as severe penalties imposed by the Danish tax authority. Companies without a proper representative may also face difficulties in claiming VAT refunds, which can put a significant strain on their finances and affect their operational liquidity. Therefore, having a local agent is essential to ensure tax compliance and effectively manage VAT-related costs.

Benefits of having a Danish VAT representative

Fiscal representation in Denmark has many benefits beyond simply registering a foreign supplier.
- The tax representative assumes responsibility for part of the VAT settlements related to the movement of goods.
- Foreign suppliers can take advantage of the reverse-charge mechanism on imports, which is made possible by appointing a Danish tax representative.
- Reduction of the number of VAT handling duties and administrative costs.
- The tax representative located in Denmark acts as an agent for the foreign supplier, ensuring that their rights and obligations are respected.
- It is possible not only to reduce costs, but also to deliver goods faster to customers in Europe.
- Streamlining logistics and administrative processes.

- The Danish VAT representative ensures accurate and timely VAT filings, reducing the risk of errors and non-compliance, which could lead to fines or audits.

- A Danish tax representative can provide valuable insights into local market conditions and regulatory changes, helping businesses adapt quickly and maintain compliance.
- Having a local representative enhances the credibility of a foreign business in the eyes of Danish tax authorities, potentially leading to smoother interactions and quicker resolutions of any issues.
- The Danish VAT representative can handle all communications with local tax authorities, mitigating language barriers and ensuring that all correspondence is accurately understood and addressed.
- With a local representative managing VAT-related tasks, foreign businesses can reduce their administrative burden, freeing up resources to focus on growth and other strategic priorities.
- The representative’s expertise in handling cross-border VAT issues ensures that transactions are processed efficiently, avoiding delays or complications that could affect supply chains.
- By delegating VAT responsibilities to a Danish tax representative, businesses can better manage risks associated with international trade, such as compliance failures or unexpected tax liabilities.

These and many other reasons are why an increasing number of foreign companies are choosing to take advantage of fiscal representation in Denmark. By doing so, they can ensure compliance with local regulations, streamline their VAT processes, reduce administrative burdens, and enhance their market presence in Europe. This strategic decision not only optimizes their operations but also positions them for long-term success in a competitive global market.

Services offered by a tax representative in Denmark

The fiscal representative offers a number of services that are essential for the proper functioning of the company's tax obligations. First and foremost, they are responsible for bookkeeping, which includes recording all the company's financial transactions, both sales and purchases. It is also crucial to maintain complete records and archive invoices and other relevant documents that may be needed during an inspection or audit. In addition, the Danish tax representative prepares financial reports that help analyze the company's operations and verify its compliance with tax requirements.

In terms of filing VAT reports and fees, the representative calculates the VAT due, taking into account the applicable rates. They are also responsible for preparing and filing the required VAT returns within the appropriate deadlines and for making payments to the tax authorities, thus ensuring timely payment of tax liabilities.

Another important task is to ensure compliance with local invoicing regulations. The representative verifies the accuracy of invoices issued, making sure they meet all local formal requirements. Also, they monitor changes in invoicing regulations to avoid errors and possible sanctions. They also support employees on invoicing best practices and VAT-related regulations.

Finally, the fiscal representative located in Denmark ensures that the company's operations comply with local VAT regulations. They monitor changes in tax regulations so that the company can adjust its practices in a timely manner. Danish tax representative regularly conducts internal audits to check compliance and identify potential areas of risk. It also offers compliance support, providing advice and recommendations, especially in cases of doubts or disputes with tax authorities.

Which companies in Denmark are required to have a VAT representative?

VAT formalities can be handled by EU companies on their own or with the support of fiscal VAT representation in Denmark. Companies that conduct taxable activities in Denmark are required to register as a VAT taxpayer and file and settle VAT returns in Denmark. For companies outside the European Union, appointing a tax representative located in Denmark is necessary to ensure that all administrative requirements are met.

To avoid tax-related problems, any company planning transactions in Denmark must carefully assess its compliance obligations and carry out the necessary registration. It is advisable to consult a tax expert to help understand the detailed regulations and avoid possible mistakes that could lead to sanctions.

Businesses based in the European Union, as well as Norway, Greenland, Iceland and the Faroe Islands, have the option of registering with the local VAT authorities themselves. While they are not required to engage a tax representative, companies outside these areas can opt to use a local representative to handle the time-consuming and complex VAT issues. For EU companies, the cost of such a service is usually lower, as they do not have to share responsibility.

For non-EU companies that must appoint a tax representative in Denmark, the responsibility for tax compliance is shared with the foreign company. To secure the representative's interests, the client may be required to provide a bank guarantee or deposit.