Denmark VAT Registration for Foreign Companies

VAT registration in Denmark is crucial for foreign companies to ensure compliance with Danish tax laws, avoid penalties, and conduct business smoothly within the Danish and broader EU market.

This guide explains VAT registration in Denmark for foreign companies, including eligibility criteria, the registration process, obligations, and compliance requirements.

Why Non-Resident Firms Must Register for VAT in Denmark?

Non-resident firms must register for VAT in Denmark to avoid costly penalties, blocked marketplace accounts, and customs holds that can disrupt operations. Without VAT registration in Denmark, businesses risk fines, delayed shipments, and even being barred from selling through popular e-commerce platforms such as Amazon or Zalando.

For non-resident businesses trading in Denmark, VAT registration ensures:

• Compliance: Meeting legal obligations under Danish tax law.
• Operational Continuity: Preventing customs delays and import restrictions.
• Access to Refunds: Reclaiming input VAT on eligible expenses.
• Market Access: Enabling sales through marketplaces and to B2C customers.

VAT registration for non-resident businesses in Denmark is mandatory; it is a legal requirement for trading and facilitating smooth cross-border operations.

When Does a Foreign Business Need to Register for VAT in Denmark? Key Triggers

Foreign businesses must register for VAT in Denmark under several scenarios, even if they do not have a physical presence in the country. The key triggers include:

• Holding Inventory in Denmark: Storing goods in a Danish warehouse or with third-party logistics providers (3PLs) triggers immediate VAT registration. For example, if a German e-commerce seller holds stock in a Copenhagen fulfillment center, VAT registration is mandatory.
• Selling Goods to Danish Customers: Importing and selling goods directly to Danish consumers or businesses, regardless of sales volume, requires VAT registration. Even a single transaction obligates non-resident sellers to register.
• Providing Digital Services to Danish Consumers: Offering digital services such as SaaS subscriptions, streaming, e-books, or mobile applications to private Danish consumers mandates VAT registration.
• Selling via Online Marketplaces: Using platforms such as Amazon DK or eBay to sell goods to Danish customers requires valid VAT registration, even if the goods are shipped from outside Denmark.

Country-Specific Examples

Below are a few examples that illustrate when foreign businesses must register for VAT in Denmark:

• Germany: A German company storing goods in a Danish warehouse and selling directly to Danish consumers must register for Danish VAT.
• United States: A US-based SaaS business offering subscriptions to Danish users must register for VAT in Denmark, regardless of turnover.
• China: A Chinese e-commerce company selling low-value goods via an online marketplace to Danish buyers is required to register for VAT in Denmark.

Note: For further details on the official process, consult the Danish Tax Agency (Skattestyrelsen) VAT registration guidelines.

Registration Thresholds & Nexus Tests

Unlike Danish-established businesses, which benefit from turnover thresholds before registration becomes mandatory, non-resident sellers must register from the first taxable transaction in Denmark.

• Nil Threshold Rule: For foreign companies, there is no threshold. VAT registration is immediate once taxable activity occurs.
• Digital Services: Providers of digital services to Danish consumers are required to register, regardless of their turnover. EU and non-EU suppliers can alternatively use the EU OSS scheme, but those opting out must register directly in Denmark.
• Low-Value Imports: For goods valued at under €150, VAT is collected at the point of sale and reported by the seller. For goods exceeding this threshold, VAT is collected at the time of import.

Denmark VAT Number Format Explained

Understanding the VAT number structure in Denmark is essential for compliance.

Examples of VAT IDs:

• Standard: DK12345678

Common errors include:

• Omitting the “DK” prefix.
• Entering 9 or more digits instead of 8.
• Typing errors in invoices can render B2B transactions invalid.

Businesses should validate VAT numbers using the EU’s VIES system before issuing invoices or processing refunds.

Is a Local Tax Agent or Fiscal Representative Required?

The requirement for a fiscal representative in Denmark depends on the business’s place of establishment:

• EU Businesses: Companies established in the EU generally do not need to appoint a fiscal representative, though many do for convenience.
• Non-EU Businesses: Companies established outside the EU are typically required to appoint a fiscal representative.

Role of the Representative:

• Submits VAT filings and correspondence to the Danish tax authorities.
• May be held jointly liable for unpaid VAT.
• Often requires a bank guarantee or financial deposit from the non-resident company.

Appointing a fiscal representative is therefore both a compliance requirement (for non-EU companies) and a practical safeguard.

Special Schemes & Simplifications

Various special schemes and simplifications are available to ease VAT compliance for certain businesses. Denmark offers several schemes that can facilitate compliance for foreign companies:

• Import VAT Deferment Scheme: This scheme allows businesses to account for import VAT in their returns instead of paying at customs, thereby improving their cash flow.
• OSS Scheme (One Stop Shop): Simplifies VAT compliance for digital service providers selling across multiple EU countries.
• Low-Value Consignment Scheme: VAT is applied at the point of sale for consignments valued under €150, thereby reducing customs complexity.
• Small-Business Exemption: This exemption primarily applies to domestic companies and is generally not relevant for non-resident businesses.

Step-by-Step: How to Register for VAT in Denmark

VAT (Value Added Tax) is a tax that businesses must charge on most goods and services they sell or supply. To register for VAT in Denmark, follow these steps:

1. Check Registration Requirement: Confirm that your business activities trigger VAT registration (nil threshold applies for non-residents).

2. Gather Required Documents: Collect business registration certificates, director IDs, proof of activity, and bank confirmation.

3. Create an Online Account: Register through the Danish Tax Agency’s online portal.

4. Submit Application: Upload the documents and complete the application form.

5. Pay Any Applicable Fees: Registration itself is free, but fiscal representatives may require deposits or guarantees.

6. Receive VAT Number: The Danish Tax Agency issues a VAT number, usually within 1–3 weeks.

Required Documents Checklist

When applying for VAT registration in Denmark, foreign companies must prepare specific documents to confirm their legal identity and business activities. Below is the essential checklist:

• Certificate of incorporation – Proof that the business is legally registered in its home country.
• Directors’ passports or IDs – Identification documents to verify the individuals responsible for the company.
• Proof of business activity – This could include sales contracts, warehouse lease agreements, or event booking confirmations in Denmark.
• Bank confirmation letter – Verification that the company maintains an active business account.
• Signed power of attorney – Required if a fiscal representative is appointed to manage VAT obligations.

Ensuring all documents are accurate and complete not only avoids rejections but also reduces the likelihood of requests for additional information, which could otherwise extend the registration process.

Processing Time & Government Fees

Foreign companies often want to know how long it takes to register for VAT and whether there are any additional costs involved. The Danish Tax Agency usually processes VAT registration applications within a relatively short timeframe, provided that the submitted documents are complete and accurate.

• Processing Time: Typically 1–3 weeks. Applications may take longer if supporting documents are missing or if further clarification is needed.
• Government Fees: There is no direct fee for registering for VAT in Denmark.
• Additional Costs: Businesses appointing a fiscal representative may incur service fees. In some cases, the representative may request a deposit or bank guarantee to cover potential VAT liabilities.

Overall, the process is straightforward; however, businesses should account for possible additional expenses if representation is required.

Post-Registration Obligations

Receiving a Danish VAT number is only the beginning. Once registered, companies are legally obligated to comply with Denmark’s ongoing VAT reporting and filing requirements. These obligations ensure transparency and help the Danish authorities track taxable activity. Non-compliance, even if unintentional, can result in penalties or suspension of the VAT number. 

Key obligations include:

• VAT Returns: Filed monthly or quarterly, depending on the company’s annual turnover.
• Deadlines: Returns are generally due within 25 days after the end of each reporting period.
• Digital Filing: All VAT returns must be filed electronically in Danish krone (DKK).
• Record-Keeping: Businesses must retain VAT-related records for a minimum of 5 years.
• E-invoicing: Companies that supply goods or services to government entities are required to issue invoices in electronic format.

Foreign businesses should also establish internal systems to track VAT deadlines to avoid late submissions, which can result in financial penalties.

Claiming Input-Tax Credits & Refunds as a Non-Resident

A significant advantage of VAT registration for foreign companies in Denmark is the ability to reclaim VAT on eligible business expenses. This ensures that businesses are not financially burdened by VAT paid on purchases that contribute directly to their taxable activities.

• Eligibility: Refunds are available to businesses registered for VAT in Denmark and, in some instances, to non-EU companies under the 13th Directive refund scheme.
• Documentation: Applicants must provide original invoices, proof of payment, and evidence of VAT registration.
• Timeline: Refund applications are usually processed within 3–6 months, depending on the complexity of the claim.
• Common Rejection Reasons: Submitting incomplete applications, missing invoices, late filings, or claiming ineligible expenses.

By maintaining accurate financial records and submitting refund claims promptly, businesses can recover substantial amounts of input VAT, thereby improving their overall cash flow.

Penalties for Late Registration or Non-Compliance

Denmark has strict VAT compliance rules, and foreign businesses must adhere to them to avoid financial and operational setbacks. Below are standard enforcement measures:

• Late Filing: Penalties of up to DKK 5,000 per missed VAT return.
• Late Registration: Businesses may be charged interest on unpaid VAT and could face restrictions from customs authorities.
• Import Restrictions: Goods entering Denmark may be withheld at customs until VAT obligations are met.
• Director Liability: In severe cases, company directors may be held personally liable for unpaid VAT amounts.

By setting up internal compliance systems or appointing a fiscal representative, businesses can avoid these costly penalties.

Deregistration & VAT Number Changes

There may come a time when a foreign company no longer needs to maintain VAT registration in Denmark, such as when taxable activities cease. In such cases, companies must deregister with the Danish Tax Agency.

Deregistration Process:

• Submit a final VAT return to settle any outstanding obligations.
• File a deregistration request through the Danish Tax Agency portal.
• Obtain official confirmation of deregistration from the authorities.

Additionally, if there are changes in the company’s details, such as a new business name, registered address, or ownership structure, these updates must be reported promptly.

Conclusion

Understanding VAT registration in Denmark is essential for foreign businesses trading in the country. Whether selling goods, providing digital services, or participating in events, non-resident firms must register for VAT from the first taxable transaction.

While the process can be complex, especially for non-EU companies that require a fiscal representative, partners like Commenda help businesses navigate the documentation, registration, and ongoing compliance requirements.

Focus on expanding your business in Denmark, while experts manage your VAT obligations. Book a free demo with Commenda today to see how we can help!

FAQs

Q1. Do non-resident remote sellers need to register for VAT in Denmark if they only supply digital services?

Yes. Digital service providers must register regardless of turnover, unless they opt into the EU OSS scheme. This ensures Denmark collects VAT from foreign businesses offering electronic, broadcasting, or telecom services to Danish consumers.

Q2. What is the sales threshold that triggers mandatory foreign business VAT registration in Denmark?

There is no threshold for non-residents. Registration is required for the first sale. Even minimal business activity, such as a single transaction, creates a VAT liability for foreign sellers.

Q3. How long does VAT registration take for a company with no local branch?

Typically 1–3 weeks, depending on documentation and whether a fiscal representative is needed. Complex cases or incomplete applications can extend the timeframe, especially for non-EU entities.

Q4. Can I reclaim input tax without appointing a fiscal representative?

EU-based companies can reclaim VAT directly; however, non-EU businesses usually must appoint a fiscal representative. This ensures compliance and secures tax payments for the Danish Tax Authority.

Q5. Which documents are required for non-resident VAT registration?

Standard documents include a certificate of incorporation, director IDs, proof of business activity, a bank letter, and a power of attorney if a fiscal representative is appointed. Additional details may be requested.

Q6. What penalties apply for late or non-filing of VAT in Denmark?

Penalties include fines up to DKK 5,000 per return plus interest charges on unpaid VAT. Repeated non-compliance can lead to audits or stricter enforcement by the Danish tax authorities.

Q7. Is there a low-value import scheme for e-commerce sellers?

Yes. Goods valued at €150 or less qualify for simplified VAT collection at the point of sale. This scheme ensures smoother processing of cross-border e-commerce orders to Danish customers.

Q8. How do currency conversions affect VAT payments?

All VAT filings and payments must be made in Danish krone (DKK). Businesses need to apply official exchange rates when converting sales from foreign currencies into DKK.

Q9. Can multiple sellers share one VAT registration on a marketplace?

No. Each seller must maintain an individual VAT registration. Marketplaces may handle VAT on behalf of sellers in some instances, but the seller remains directly responsible.

Q10. What are the costs of appointing a fiscal representative, and can Commenda provide this service?

Costs vary depending on the representative and the scope of service. Commenda offers fiscal representation, assisting non-resident businesses with compliance, filings, and communication with Danish authorities.

Q11. How do I deregister for VAT in Denmark?

Businesses must file a final VAT return and request deregistration through the tax portal. Deregistration is typically approved once all outstanding liabilities are settled.

Q12. Does the reverse-charge mechanism remove the need for VAT registration in Denmark?

In B2B service transactions, the reverse charge shifts VAT responsibility to the recipient. However, VAT registration is still required for most goods transactions and B2C supplies.