Annual tax return for companies in Denmark
If you own a company in Denmark you are obliged to submit an annual tax return to SKAT, Danish tax authorities. As a Danish entrepreneur, you can file your annual tax return electronically at www.skat.dk
, using a pre-ordered special code NemID or Tastselv. You will also need a CPR (Personnummer) issued by the Danish Customs and Tax Administration in order to settle your income tax and VAT.
What is worth knowing about the annual settlement of Danish companies?
- If you are self-employed in Denmark you have unlimited tax liability and are entitled to a personal tax allowance (Personfradrag), the amount of which is set each year.
- As a Danish entrepreneur you may also take advantage of other tax reliefs and include them in your annual tax return, e.g.: relief for costs of renting an apartment in Denmark (you have to present the lease agreement), relief for costs of utilities in a rented apartment (you have to present receipts or bank transfers), relief for costs of travel (e.g. to your home country, you have to present bus, plane or ferry tickets, freeway tolls etc.).
- Every entrepreneur receives a special tax return form from SKAT - Selvangivelse, which is sent to the address provided by the taxpayer at registration.
- People who run their own business in Denmark have to settle the tax with Danish tax until July 1st.
- After July 2nd SKAT (Skattestyrelsen) issues and sends to the Danish entrepreneur a document, Årsopgørelse, which contains the tax decision, that is the amount of refund (Skat til udbetaling, marked green) or surcharge (Restskat til betaling, marked red).
- If you want to check your statement, you have to click on Se årsopgørelsen in your individual SKAT account. If you want to correct your tax return to take account of allowances that Danish entrepreneurs are entitled to, you need to click on Ret årsopgørelsen/oplysningsskemaet.
- The tax refund is paid into a NemKonto that the Danish entrepreneur has previously set up.
- Personlig indkomst means personal income after the deduction of ATP and pension contribution allowance.
- Kapitalindkomst means capital income, i.e. interest income (e.g. from bonds, investments or deposits) minus interest charges on loans.
- Capital income (kapitalindkomst) and deductions from capital income (fradrag and kapitalindkomst) appear on the annual tax return sent by SKAT.
- The term Renteindtægter means interest income and Renteudgifter means interest expense.
- In Denmark, companies can settle the tax, make a correction to the tax return or appeal the decision from SKAT, up to 3 years
- Danish entrepreneurs are allowed to deduct insurance premiums, child maintenance, pension contributions, transport to work and catering costs from their tax return but the Danish tax authorities have the right to check within 7 years whether these expenses are correct.
- Danish companies have the right to use the reverse charge procedure which means that foreign companies that want to sell goods and services to Danish companies do not have to charge Danish VAT. In this case you do not charge tax on the invoice, you only enter the net value of the goods or services and use a ready-made formula, e.g. Reversed charge, which means that the buyer should charge and pay VAT on the service and enter the CVR or SE-nummer (the buyer's registration number).
- The fixed 25% VAT is paid by all companies selling services or goods in Denmark. This is a value-added tax added to the price of the services or goods that are sold by the company and the companies must account for this tax in their annual tax return.
- Danish business owners must register their business as a VAT payer before providing services and goods (they have 8 days to do so).
- All Danish companies with an annual turnover of more than DKK 50,000 are subject to VAT. In this case, they must be registered for VAT via the RUT website (virk.dk).
- If the Danish taxpayer's annual income does not exceed DKK 42,900 they will receive a full tax refund.
- A Danish entrepreneur cannot pay more tax than 51.5% for the previous tax year.
- Entrepreneurs who have decided to run their own business in Denmark have a full tax liability, i.e. they must submit an annual tax return to the Danish tax authorities, taking into account all income, both Danish and foreign, taking into account the double taxation treaty.
Type of annual tax settlement in Denmark
In Denmark, the type of company's annual tax return with SKAT depends on the entrepreneur's choice of business type.
The taxation of a Danish sole proprietorship differs from that of a limited liability company, joint stock company, limited partnership or general partnership.
It is worth considering which form of Danish business, and consequently, which form of taxation and annual settlement with the Danish Tax Office will meet our expectations and possibilities.
In Denmark we distinguish the following tax settlements for companies:
- Annual tax return for a sole proprietorship (Enkeltmandsvirksmhed).
- Annual tax statement for a limited liability company (Aktieselskab - A/S).
- Annual tax statement for a general partnership (Interesselskab - I/S).
- Annual tax statement for a limited liability company (Anpartsselskab - ApS).
- Annual tax return of a limited partnership (Kommanditselskab - K/S).
- Annual tax statement for a branch of a foreign company (Filial af udenlandsk selskab).
- Annual tax return of a representative office of a foreign company (Salgskontor).
- Annual tax statement for a cooperative association (Andelsforening/Brugsforening).
- Annual tax return for a limited liability company (from 1 January 2014 Iværksætterselskab - IVS).
Danish business owners are required to file their tax return for the previous tax year by July 1.
Annual tax return for a sole proprietorship in Denmark
Skattestyrelsen (SKAT), treats income from self-employment (Enkeltmandsvirksmhed) as income for the business owner, so business tax is declared on one tax return, and the business owner who pays taxes and contributions is entitled to pension and health benefits like those who are employed in Denmark. Once every six months or quarter, a tax return (income tax and VAT) must be filed through the SKAT website.
Advance income tax payments are due on March 20 (you can make a higher advance payment on this date to receive your tax refund with interest, which is higher than in a bank) and on November 20 (the interest rate is reduced by 0.4 on this date, so the interest is lower than in a bank).
An entrepreneur who runs a sole proprietorship in Denmark should file his tax return for the last tax year by July 1st. If he settles the tax via the SKAT website, he will automatically receive feedback about the tax decision.
What else should you know about annual tax returns for self-employment in Denmark?
- If you want to settle your tax online, you need a special code - TastSelv-kode (tastselv.skat.dk), consisting of 8 digits, which is also your password to the system. The individual TastSelv-kode (or NemID) gives access to private tax information.
- A Danish business owner should receive from SKAT a document called Selvangivelse, which is a tax return form, and after July 2, a tax decision, Årsopgørelse.
- In Denmark, entrepreneurs can write off expenses such as:
- expenses related to purchase of goods for sale,
- expenses on company insurance,
- expenses related to renting premises,
- network expenses
- telephone costs,
- expenses on company cars,
- costs of maintenance and repair work on company premises,
- heating costs,
- electricity expenses,
- Expenses for machinery, equipment and fixtures (if the expenses are not tax deductible at the time of purchase, you must include any costs in depreciation),
- Inventory costs,
- expenses for an auditor,
- attorney's fees,
- Any plant, machinery, goods or equipment that is intended for private use, even though purchased for the company, cannot be deducted on the company's annual return,
- All company documentation relating to allowances that have been taken into account in the annual Danish business tax return must be kept by the entrepreneurs for 5 years,
- In Denmark, the tax return must be submitted online within 6 months after the end of the tax year (calendar year or other but 12 months). If the tax year ends between February 1 and March 31, the tax return should be submitted by August 1 and the tax paid on March 20 and November 20.
Danish sole proprietors should choose one of 3 options for taxing their business:
a. Taxation according to the Share Capital Act (Kapitalafkastordning), which assumes that part of the company's profit can be transferred to personal income and part to capital income;
b. taxation of the profit as personal income, i.e. the same as for employed persons;
c. Taxation in accordance with the Enterprise Act (Virksomhedsordning), which provides for tax deductibility of costs from loan interest, but you can also keep the profit from the company as bank savings, which will also be an advantage.
Annual accounting for companies in Denmark
Danish entrepreneurs who decide to establish and operate companies in Denmark are obliged to pay corporate income tax - 22% CIT. If the annual turnover of a Danish company exceeds DKK 50,000, it becomes a payer of 25% VAT.
All Danish companies must account for income tax on their total income, including income from property and capital, up to six months after the end of the tax year.
Important information about the annual return of Danish companies:
- The annual tax return of a general partnership (Interesselskab - I/S) depends on the form of taxation the owner has previously chosen for his company. Danish entrepreneur running general partnership should choose one of 3 possibilities of taxation (the same as in case of one-man business activity - Enkeltmandsvirksmhed):
- Taxation in accordance with the Share Capital Act (Kapitalafkastordning), which assumes that part of the company's profit can be transferred to personal income and part to capital income,
- taxation of the profit as personal income, as for employees,
- Taxation in accordance with the Enterprise Act (Virksomhedsordning), which provides for tax deductibility of costs from loan interest, but you can also keep the profit from the company in the form of bank savings, which will also be an advantage.
- The annual tax return of a limited liability company (Anpartsselskab - ApS), like that of a joint stock company (Aktieselskab - A/S), is related to the taxation of the Danish company, which as a physical entity does not require its owners to be liable for the company's obligations with their own assets, but only with a share in the company's capital. The company's shareholders settle with the Danish tax for the taxation of their income or dividends.
- The annual tax return of a limited liability company (Iværksætterselskab - IVS) is related to its taxation according to the Companies Act, to which the owners of IVS are not subject, due to the fact that the company is a physical entity. Iværksætterselskab must prepare unclassified annual accounts.
Company owners submit their tax return each year by 1 July. They receive
a Selvangivelse tax return form from SKAT, which they must complete, taking into account any allowances they are entitled to, and submit online at www.skat.dk
. Owners of Danish companies are required to prepare open financial statements each year.
Documents needed for annual tax return for Danish companies
If you are the owner of a Danish company you are obliged to submit an annual tax return to the Danish Customs and Tax Authorities and if you have employees you must also ensure that they receive all the necessary documents for their annual tax return.
Deadlines for annual tax returns for companies in Denmark
Danish entrepreneurs (and Danish non-tax residents) who are self-employed in Denmark must settle their Danish tax return by July 1 (due to the pandemic, the deadline for filing the Danish tax return for 2019 has been extended to September 20, 2020).
In Denmark, those who have limited tax liability (and Danish tax residents) should settle between March 1 and May 1. If you want to settle for the previous tax year with your spouse and take advantage of the Cross Border tax credit, you have until June 1.
After July 2, SKAT (Skattestyrelsen) issues and sends to the Danish taxpayer
a document - Årsopgørelse - containing the tax decision, i.e. the amount of refund (Skat til udbetaling, marked in green) or surcharge (Restskat til betaling, marked in red).
In Denmark business owners can settle the tax, make corrections to the tax return or appeal the decision of SKAT up to 3 years and 4 months back.
Danish entrepreneurs are entitled to take advantage of tax allowances but the Danish tax authorities have 5 years to check whether the allowances on the tax return are correct and therefore Danish business owners must keep all documentation proving the accrued expenses for this period.
- By when do I have to settle my tax in Denmark?
Tax returns for previous tax years should be submitted till 1st May (employed and Danish residents) or till 1st July (Danish entrepreneurs). The date is set by SKAT and included on the Selvangivelse tax form that it sends to the taxpayer. The penalty for not submitting the tax return can be up to DKK 5,000. Danish taxpayers have 3 years and 4 months to correct their tax return for the tax year.
- How can I order Tastselv?
To order a Tastselv code you need to log on to www.skat.dk and then select:
- Log på,
- Bestil kode,
- TastSelv kode,
- enter CPR with a dash in the empty field,
- enter your password via SMS, e-mail or letter,
- after receiving the code log on to skat.dk via Log på med TastSelv kode,
- enter the CPR and wait for the code,
- enter your new password (from 8 to 16 characters), repeat the password and click FORTSÆT,
- After that you are logged in with the TastSelv code.
- Where can I report a change of my mailing address?
You can update your address for official correspondence at Borgerservice.
- What websites are worth knowing about as an entrepreneur in Denmark?
- about the website of the Danish Customs and Tax Administration - Skattestyrelsen, skat.dk,
- about the website of the Danish Aliens Service - Udlændingestyrelsen, nyidanmark.dk,
- about the website of the information service for foreign nationals - International Citizen Service, icitizen.dk,
- about the website of the Danish Ministry of Employment - Beskæftigelsesministeriet, workindenmark.dk,
- about the website of Borger.dk, lifeindenmark.dk.
- What terms can I find on my annual tax return?
- Bundskat - the bottom tax (8%),
- Topskat - the highest tax sample (15%),
- Skrå skatteloft - upper limit of tax to the municipality and to the state, which excludes Labour Fund contribution and church tax,
- Personlig indkomst - personal income from work, which includes allowances such as benefits, pension contributions and Labour Fund contributions,
- Skattepligtig indkomst - personal and capital income after deducting deductible expenses, which is taxable income,
- Ligningsmæssige fradrag - relief from municipal and health taxes,
- Kapitalindkomst - capital income, i.e. interest income minus interest expense,
- Fradrag - relief deducted from income,
- Kommuneskat - municipal tax,
- AM-bidrag, an 8% contribution to the Labour Fund,
- Lønindkomst (inkl. fri bil/telefon), which is income from work (including company car/phone),
- Eget pensionsbidrag, or own share of pension contribution (5%),
- Personalegoder, which are employee benefits such as health insurance,
- Renteindtægter, which is interest income,
- Renteudgifter, or interest expense,
- Beskæftigelsesfradrag, or work relief,
- Befordringsfradrag, i.e. mobility allowance,
- Håndværkerfradrag, i.e. craftsman's relief,
- Skattepligtig indkomst, or taxable income,
- Skatteberegning, i.e. tax assessment,
- Ejendomsværdiskat, i.e. real estate tax,
- Personfradrag bundskat, i.e. lower tax free amount,
- Personfradrag kommuneskat, i.e. municipal tax free amount,
- Beregnet skat - accrued tax.
- What are the Danish Income Tax Percentages for 2019?
- 8% for income less than DKK 50,217,
- 39.2% for incomes between DKK 50,217 and DKK 558,043,
- 56.5% for income higher than DKK 558,043.
- How much tax for a car in Denmark?
In Denmark, the so-called luxury tax is up to 180% of the net price of the purchased car.
- What is begrænset skattepligt?
Begrænset skattepligt means limited tax liability.
- What does sundhedsbidrag mean?
Sundhedsbidrag means health insurance premiums.
- By when do companies have to submit their annual tax return in Denmark?
Danish businesses should submit their annual tax return for the previous tax year to SKAT by July 1.