How to establish a business in Denmark: Accounting and reporting

Part 3 of 3 in our series, "How to Establish a Business in Denmark."

Getting your business registered in Denmark is only the first step. Once you're up and running, a new set of responsibilities begins: keeping proper accounts, meeting reporting deadlines, and understanding Danish corporate tax rules.

This article is the third and final part in our three-part series on how to establish a business in Denmark. Here, we give you an easy overview of accounting and reporting: what the rules mean for your business, the deadlines to watch, and how Danish corporate tax works.

Do you need to follow Danish accounting rules?

Yes. Every commercial company operating in Denmark, including foreign companies with Danish business activities, must comply with the Danish Bookkeeping Act. What this means for you in practice depends on how your business is registered.

• If you run a branch, you must calculate its taxable income annually and file a tax return, and the parent company's annual report must be submitted to the Danish Business Authority - and published, whether or not it's published at home too.
• If you run a limited liability company (an ApS or A/S), you must prepare and submit an annual report, and you may need an audit depending on your company's size.

Choosing the right structure from the outset affects both your reporting burden and your privacy, so it's worth thinking through early. We can help you with this.

VAT and tax registrations you may need

Once your accounts are in order, VAT is usually the next thing on your list. Foreign businesses should note there is no minimum threshold, so VAT registration often applies from your very first taxable activity in Denmark - whether that's selling to Danish businesses, private consumers, or across the EU.

If you sell to consumers in other EU countries, the VAT One Stop Shop (OSS) scheme lets you declare and pay VAT for all your EU sales through a single country, rather than registering separately everywhere. Selling to businesses elsewhere in the EU is usually VAT free, provided you can document the buyer's VAT number and that the goods have genuinely left Denmark.

Deadlines you need to have on your radar

Danish authorities apply strict deadlines, and missing them can be costly. The key ones to know:

• Annual report: Due within six months of the end of your financial year (four months for state owned and listed companies). Missed deadlines can lead to a personal, taxable levy on senior management.
• Tax return: Generally due within six months of the end of the income year. Late filing triggers a surcharge of up to DKK 5,000.
• VAT returns: Reported monthly, quarterly or half yearly, depending on your revenue.
• Payrolltax: Deadlinesvary depending on which calculation method applies to your business.

Which deadlines apply to you - and how strictly they're enforced - depends on your company's size and structure, so it's an area where a little guidance goes a long way.

Understanding Danish corporate tax

Denmark's corporate tax rate is 22 percent, in line with Sweden and Norway. Denmark taxes companies on a territorial basis, meaning a permanent establishment's profits are taxed locally, with deductions allowed for expenses tied to earning that income.

A few rules worth being aware of:

• Group companies are subject to mandatory national joint taxation, with international joint taxation available as an option.
• Dividends from a Danish subsidiary can often be distributed tax free to a parent company owning more than 10 percent of the shares.
• Interest deductions are subject to thin capitalisation rules, an interest rate cap and EBIT based limits.
• Losses can generally be carried forward to offset future profits.
• Companies investing in testing and research may qualify for additional tax deductions or cash payments on qualifying losses.

If your business has cross border transactions with affiliated companies, you may also need to prepare transfer pricing documentation - though exemptions exist for smaller companies and lower transaction volumes.

Key things to remember

• All Danish companies must follow the Danish Bookkeeping Act.
• Whether you need an audit depends on your company's size.
• VAT registration usually applies from your first taxable activity, with no minimum threshold for foreign businesses.
• Annual reports, tax returns, VAT returns and payroll tax all have separate deadlines - missing them can be costly.
• Denmark's corporate tax rate is 22 percent, with specific rules on joint taxation, interest deductions and transfer pricing.
• When in doubt, get local advice - it saves time and avoids costly mistakes.

Want the full picture?

This article is just an overview. Our complete whitepaper, "How to Establish a Business in Denmark - Accounting and Reporting," goes deeper into every step - including detailed VAT rules, exact reporting deadlines, corporate tax provisions and transfer pricing requirements.

Download the free whitepaper here

Do you need help?

At Azets we can help you with accounting, reporting and tax compliance in Denmark - from your first annual report to ongoing VAT filing and corporate tax planning. We also offer advice and consultancy services about all business aspects. Please reach out, if you have any questions.