Accounting for a company in Denmark
Accounting for a company in Denmark - an introduction Annual accounting of the various legal forms of Danish business activity Annual accounting for Danish companies - important concepts Deadlines and documents for the company's annual return in Denmark Summary FAQ
Accounting for a company in Denmark - an introductionThe annual company return in Denmark applies to every entrepreneur, regardless of whether he or she runs a sole proprietorship, a general partnership, a joint stock company or a branch of a foreign company. Failure to comply with this obligation by the deadline, i.e. by 1 July of the following year, may have its consequences in the form of a financial penalty imposed on the business owner by the Danish tax authorities (Erhvervsstyrelsen). When setting up a business in Denmark, it is important to bear in mind that the type of annual tax return depends on the type of legal form of business selected, so it is advisable to find out in advance which form of taxation will be the most suitable for you. In Denmark, all official matters, from registering a company through filing tax returns to the annual tax return, can be handled online, which greatly facilitates the completion of necessary formalities.
Who is affected by the annual tax return in Denmark? By what date do I have to settle with SKAT when running my own business in Denmark? What documents are necessary for the annual settlement of a company in Denmark? Which terms is it worth to be familiar with before submitting the annual return to the Danish tax office? You will find answers to these and other questions in the following chapters.
Annual accounting of the various legal forms of Danish business activityTypically, the requirement for all businesses is to furnish a presented, audited and approved annual reports to the Danish Business Authority subsequent to the conclusion of their fiscal year. This obligation rests with the company's management, comprising the executive board and the board of directors. When you decide to set up and run your own business, you have an unlimited tax liability and therefore both bigger and smaller companies must file an annual tax return every year by 1 July, taking into account and confirming all allowances and costs, regardless of what legal form of business you are running. Settlement of Danish companies - step by step:
- SKAT ensures that a preliminary tax return form is issued and send - Selvangivelse - to the owner of the every Danish company at the address provided during business registration, which must be supplemented with missing data, such as company expenses and allowances, and then must be submitted by 1 July via the Danish tax authority's website www.skat.dk.
- After 2 July, SKAT issues and sends a tax decision document - Årsopgørelse - to the Danish company owner.
- The company owner in Denmark should pay both 22 per cent corporation tax (CIT) and 25 per cent value added tax (VAT) and corporate income tax, which must be settled by 6 months after the close of the tax year.
- Danish limited liability companies are taxed on the basis of the Companies Act and their owners are required to prepare a public report each year containing: an annual balance sheet, a summary of the company's management, a list of all changes in equity and a profit and loss account.
- Shareholders of both Danish ApS and Danish limited liability companies account to SKAT on the basis of taxation of their own income or dividends. Owners of companies, which in Denmark are physical entities, are only liable for the company's obligations with their share of capital and not with their own assets.
- In Denmark, company owners are required to issue and send their employees a document summarising their earnings - Oplysningsseddel.
- Owners of Danish general partnerships must choose one of three forms of taxation: taxation of profit as personal income, taxation according to the Enterprise Act - Virksomhedsordning (company profit can be retained as bank savings or credit interest costs can be deducted from tax) or taxation according to the Share Capital Act - Kapitalafkastordning (part of the company profit can be transferred to capital income and part to own income).
Settlement of a Danish sole proprietorship:
- SKAT issues and sends a partially completed tax return form - Selvangivelse - to the owner of the sole proprietorship, at the address provided when registering the business, which must be supplemented with missing data, such as business expenses and allowances, and then submitted by 1 July via the Danish tax authority's website www.skat.dk.
- After 2 July, SKAT issues and sends a tax decision document - Årsopgørelse - to the Danish business owner.
- Owners of sole proprietorships in Denmark must choose one of 3 forms of taxation.
- Owners of sole proprietorships in Denmark are required to submit an annual tax return covering income tax and VAT either quarterly or semi-annually. Tax should be included on one return, as there is no separation between own and company income in a sole proprietorship.
If a tax return is filed using an individual NemID or TastSelc code, a tax decision is issued immediately and the business owner has three years both to appeal the decision and to have the document corrected.
Annual accounting for Danish companies - important conceptsBelow you will find explanations of terms related to the company's annual return in Denmark, the meaning of which you should familiarise yourself with so that you do not make a mistake when completing your tax return.
- AM-bidrag - 8 per cent contribution to the Labour Fund.
- Årsopgørelse - the tax decision form issued and sent out after 2 July by SKAT.
- Begrænset skattepligt - limited tax liability.
- Befordringsfradrag - travel allowance.
- Beregnet skat - accrued tax.
- Beskæftigelsesfradrag - relief for work.
- Bundskat - 8 per cent bottom tax.
- Eget pensionsbidrag - 5 per cent own share of pension contribution.
- Ejendomsværdiskat - property tax.
- Fradrag - relief deducted from income.
- Håndværkerfradrag - craftsmen's relief.
- Kapitalafkastordning - share capital act. Entrepreneurs who have opted for taxation under this act may transfer part of the company's profit to capital income and part to personal income.
- Kapitalindkomst - capital income.
- Kommuneskat - municipal tax.
- Ligningsmæssige fradrag - health and municipal tax relief.
- Lonseddel - monthly or weekly pay slips.
- Lønindkomst (inkl. fri bil/telephone) - income from work.
- NemKonto - bank account to which, among other things, tax refunds are paid in Denmark.
- Oplysningsseddel - document summarising an employee's earnings (PIT-11).
- Personalegoder - employee allowances.
- Personfradrag - personal tax allowance.
- Personfradrag bundskat - lower tax free amount.
- Personfradrag kommuneskat - municipal tax free amount.
- Renteindtægter - interest income.
- Renteudgifter - interest expense.
- Restskat til betaling - tax surcharge amount.
- SE-nummer - purchaser's registration number.
- Selvangivelse - tax return form sent by SKAT to the address given when registering a company in Denmark.
- Skat til udbetaling - tax refund amount.
- Skatteberegning - tax calculation.
- Skattepligtig indkomst - taxable income.
- Skrå skatteloft - upper limit of municipal tax.
- Sundhedsbidrag - health insurance contributions.
- TastSelv-kode - 8-digit individual code, which is also the password to the account on tastselv.skat.dk containing individual tax data.
- Topskat - 15 per cent top tax threshold.
- Virksomhedsordning - Enterprise Act. Those who have chosen to tax their business in accordance with this Act can keep the profit from their company in the form of bank savings or write off part of their loan interest costs against tax.
Remember that in Denmark all company documents, including the company's annual accounts, are written in Danish or should be translated into Danish.
Please note that in Denmark, all company documents, including the annual company accounts, are written in Danish or should be translated into Danish.
Deadlines and documents for the company's annual return in DenmarkEntrepreneurs must submit their annual report in accordance with the rules in force and it must be delivered to the Danish Business Authority no later than 5 months following the conclusion of the fiscal year (as of 2023). However, for listed companies and national joint-stock companies, the deadline is 4 months after the end of the financial year. In addition, the Financial Statements Act stipulates that annual reports should be promptly submitted to the Danish Business Authority following their approval by the annual general meeting. In the event that the company's articles of association state (a statutory company document) that annual general meetings must be conducted within five months subsequent to the conclusion of the financial year, it might be prudent to consider revising these provisions. The Danish Parliament passed revisions to the Danish Financial Statements Act on 19 May 2022, resulting in a permanent extension of the submission deadline for annual reports from enterprises falling under reporting classes B and C from five to six months. For numerous Danish businesses, the financial year aligns with the calendar year, from 1 January to 31 December, with a submission deadline for the annual report set for 31 May. Failure to meet the deadline for submitting the annual report will result in fines for each member of the management team.
In Denmark, both owners of sole proprietorships and companies are required to complete and submit, together with all required attachments, an annual return for the previous tax year. The Danish tax authorities, on the other hand, are obliged to send each entrepreneur a Selvangivelse, i.e. a pre-filled tax return form, which must be supplemented with, for example, the allowances to which they are entitled. The deadline for submission of the tax return is 1 July, while as of 2 July, Skattestyrelsen begins to send out the Årsopgørelse, a printout containing the tax decision. Under danish legislation, both Danish residents and those with limited tax liability should settle between 1 March and 1 May, while by 1 June those who wish to take advantage of the Cross Border relief by settling jointly with a spouse. In Denmark, every entrepreneur has the right to appeal a tax decision or make a correction to a tax return up to 3 years and 4 months back, during which time all allowances can also be taken into account and company costs can be written off (except for goods, equipment, machinery, equipment for private use), but it should be noted that SKAT has 5 years to review the validity of all allowances included in the company's annual return. It is worth remembering that in Denmark, a company's tax return must be filed up to six months after the end of the tax year, while a penalty of up to DKK 5 000 can be paid if a tax return is not filed.
SummaryThe Danish company return applies to all entrepreneurs doing their own business in Denmark. After receiving the Selvangivelse from SKAT for the previous tax year, the owner of a Danish company should complete it and submit it by 1 July - either by letter to the Danish tax authorities or via the website www.skat.dk, for which the Tastselv or NemID codes are required. On this website, it is also possible to review the tax decision (by clicking on Se årsopgørelsen) and to take into account allowances or make corrections to the annual return form (by clicking on Ret årsopgørelsen/oplysningsskemaet). People running a business in Denmark are entitled to both a personal tax allowance (Personfradrag) and a number of other allowances, which must be taken into account when completing Selvangivelse. After 2 July, entrepreneurs can expect a tax decision document - Årsopgørelse, issued by Skattestyrelsen. In addition to the NemID and Tastselv codes, Danish company owners should also obtain a Personnummer (CRP) from Customs and Taxation, which is needed for income tax and VAT (in Denmark, any company whose annual turnover exceeds DKK 50 000 must be reported to the RUT as a VAT payer, via virk.dk).
It's important to bear in mind the double taxation agreement, ensuring that foreign-earned income is exempt from taxation in the resident country. Following the submission of the return, the entrepreneur has the option to review or amend the filed tax declaration. Simply visit www.skat.dk and log into your personal account (pre-order a specific NemID or Tastselv code to gain access). Consider using a highly experienced accountant to assist in preparing annual reports. If you have any doubts about Danish regulations, it is also a good idea to consult a trustworthy lawyer.
- How do I do my annual accounting in Denmark for my company?
The best way to do your annual return in Denmark is through the Danish tax office's website www.skat.dk, but you must first order an individual 8-digit TastSelv-code via tastselv.skat.dk.
- Can I make a correction to my company's annual return in Denmark?
Yes, in Denmark it is possible to apply an adjustment to your company's annual return, to do this go to www.skat.dk and select Ret årsopgørelsen/oplysningsskemaet.
- Can I include tax credits in my company's annual return in Denmark?
Yes, once SKAT has sent you the initial tax return - Selvangivelse - you have the right to supplement the document by taking into account all the allowances you are entitled to.
- How much time do I have in Denmark to appeal a tax decision and make a correction to my tax return?
In Denmark, you have 3 years and 4 months to appeal a tax decision and make a correction to your tax return.
- Where can I update my Danish mailing address?
You can change your Danish address for official correspondence at borger.dk.
- What is luxury tax and how much is it?
In Denmark, the luxury tax, i.e. for a car, is equal to 180% of the net price of the car purchased.
- What costs can I deduct from my tax when running a business in Denmark?
When running a business in Denmark, you can deduct costs such as:
- renting premises for your business
- the purchase of machinery, goods and equipment,
- child maintenance,
- pension contributions,
- transport to work,
- auditor, etc.
- What is the highest tax I can pay for the previous tax year when running my own business in Denmark?
If you run a business in Denmark, you cannot pay a tax higher than 51.5%.
- What is the reverse charge procedure and who can benefit from it?
The reverse charge procedure, which can be used by Danish companies, is that foreign companies that want to sell services and goods to Danish companies do not have to charge Danish VAT. In this case, the tax is not charged on the invoice, but the net value of the service or goods is written down, Reversed chargé is written down (the purchaser is obliged to charge and pay VAT on the service) and the CVR or SE-number of the purchaser is written down.
- Which website addresses are worth familiarising yourself with when running your own business in Denmark?
It is worth knowing about such Danish websites as:
- icitizen.dk - information service for foreigners (International Citizen Service),
- skat.dk - Danish Customs and Tax Administration - Skattestyrelsen,
- lifeindenmark.dk - Danish Aliens Office (Udlændingestyrelsen),
- workindenmark.dk - Danish Ministry of Employment (Beskæftigelsesministeriet),
- How much time does SKAT have to check whether the allowances I have taken into account in my annual tax return are correct?
In Denmark, SKAT has 5 years to check whether the allowances you have taken into account are correct, so you should keep all documents related to your business expenses for this period.
- In which case will I receive a full tax refund in Denmark?
In Denmark, you will receive a full tax refund if your annual income was no more than DKK 42 900.
- What are the provisions for the accessibility of company information in Denmark?
While a significant portion of company information is accessible for public scrutiny, the government does not maintain a registry of company shareholders.
- Where can I get a Danish Certificate of Incorporation?
The Danish Certificate of Incorporation is granted by the Danish companies registry upon the incorporation of a company in Denmark.