The VAT policy in Denmark is based on the "destination principle" of the European Union VAT system. This means that VAT, or moms in Danish, is payable to the country's government where the product or services are consumed, regardless of where you're supplying them from. So, if you have clients in Denmark, you have to comply with Danish VAT rules. VAT is administered by SKAT, the Danish Customs and Tax Administration. Check out this guide if you're looking to hire freelancers or contractors from Denmark with ease.
The standard VAT rate in Denmark is 25%, and while there are no reduced VAT rates, you may be entitled to certain deductions based on your services and income. This guide will go into details about VAT rates and VAT obligations you have when working as a freelancer or a contractor in Denmark.
Who is Required to Report and Pay VAT in Denmark?
If you have a sales income of more than 50,000 DKK over 12 months, you must report and pay VAT; however, registering for VAT is optional if your sales income is less than 50,000 DKK. If you register for VAT, you must make sure to charge, declare and pay VAT even if your sales are less than 50,000 DKK.
Certain services, such as those in the health care and education sector, are exempt from registering and paying for VAT. Generally, in this case, you will still need to pay payroll tax instead of VAT. However, it is possible to have both sales subject to VAT and sales exempt from VAT- you only have to pay VAT on the sales subject to VAT.
Start Working as an Expat Freelancer in Denmark
All foreigners who meet the legal requirements can work in Denmark as freelancers; however, most of the world’s citizens would first need a visa or work permit to do so.
Citizens of a Nordic country do not need a work permit; they are free to arrive, live and work in Denmark. However, citizens from an EU or EEA nation and Switzerland have to apply for a certificate of registration at the Government Administration (Statsforvaltningen). For citizens of the remaining countries, a work permit is required.
VAT Rates for Freelancers in Denmark
Since 1992, the standard VAT rate in Denmark has been 25%. This is levied on all goods and services. There are no reduced VAT rates, but the 0% rate is applied on certain products like newspapers and journals, intra-community and international transportation. Although there are no charges on zero rates, you should record sales of goods and services and create a report based on your returns.
When to Register for VAT as a Freelancer in Denmark
You must register for VAT if your revenue exceeds 50,000 DKK over 12 months. If you know that your sales will exceed this amount, you must register no later than 8 days before starting your business.
Once you have a Danish VAT number, you must submit periodic VAT returns detailing all taxable sales and purchases. Returns are submitted monthly, quarterly or bi-yearly, depending on your annual sales income.
- You need to file every six months if your annual revenue subject to VAT is less than 5 million DKK and if you have filed your VAT return and paid on time.
- You need to file a VAT return quarterly if your business is new, if you have requested quarterly settlement, or if Danish authorities assess your business's annual revenue to be 5-50 million DKK.
- You need to file a VAT return monthly if your annual revenue is more than 50 million DKK or if you have requested a monthly settlement yourself.
The deadlines for VAT returns are determined as follows:
- 1st day of the 3rd month after the end of the quarter or half-year in case of the VAT returns are submitted on quarterly or half-yearly basis;
- 25th day of the month of the following month in case the VAT returns are submitted monthly.
How to Register for VAT in Denmark as a Freelancer
You must register for VAT online by filling out the form ”Registration of Non-Danish Company – Start - 40.112”. Once you have registered, you will be sent the registration certificate along with your Danish VAT number (CVR number/SE number) to your postal address. After registering, you will also receive a password to E-tax for businesses, which you must activate within 30 days. You can access this to declare, pay and file VAT returns for every period.
Alternatively, you can make use of the Mini One-Stop Shop, an EU-wide tax system that allows you to consolidate all of your EU VAT in one single tax return. This scheme is optional but especially useful if you have customers in multiple countries, including Denmark, within the EU. In addition, MOSS allows you to avoid registering in each Member State of consumption.
Financial Obligations of VAT Registered Freelancers In Denmark
Registering for VAT is only the first step. From the day of your registration effective date, you must:
- Charge the correct VAT rate
- Pay any VAT owed to the Tax Department of Denmark for each period
- File VAT returns
- Maintain VAT records for at least six to ten years
Furthermore, every VAT-registered individual is required to:
- Keep track of all purchases and transactions,
- Keep a running total of their VAT account, and
- Make sure their VAT invoices are accurate.
Keeping the accounts and purchases and VAT invoices by your own can sometimes cause lots of headaches. At Xolo, we can help you to future-proof these vital documents by automatically generating, storing, and maintaining them digitally in our servers for as long as you need them so creating and keeping the VAT invoices are now a no-brainer for you.
Sending and Keeping VAT Invoices as a Freelancer with Xolo
Learning all the Danish VAT guidelines can be challenging, especially if you’re a sole proprietor and in charge of several aspects of your business. Luckily, at Xolo, we offer a range of solutions that can handle all the paperwork and legal jargon, allowing you to focus on your core competencies and get rid of worries with VAT compliance.
Xolo Go allows you to invoice your clients with Xolo adding VAT automatically. You'll have a dedicated bank account and a way to get reimbursed by uploading your expenses. With Xolo Go, you can enjoy the benefits of having your own company without having to register one yourself!
Xolo Leap will put you on the fastest track to launch your EU company, 100% remotely and help you set up a business-of-one with minimal stress, no paperwork and seamless accounting together with professional help from our legal and compliance experts. And yes of course! we'll help you in full course with your VAT concerns with VAT-compliant invoices and VAT collection.
Let Xolo help you to lift your admin burden so you can spend your time work on things that actually make you money!
