SME Scheme – General features
Exemption
It is possible to opt for the SME scheme in Denmark.
Transactions excluded from the SME scheme
The following transactions are excluded from the SME scheme:
- Exempt cross-border supplies of new means of transport made from one Member State to another.
National annual thresholds
Denmark maintains two national VAT thresholds:
- General VAT threshold for any goods and services (DK01), DKK 50,000, except
- First-time sales of certain works of art (DK02), DKK 350,000 (including up to DKK 50,000 of any other goods and services).
Sales of goods and services (DK01)
As a general rule, you are subject to the general VAT threshold if you sell goods and services subject to VAT. This means that you must register for VAT when your turnover exceeds DKK 50,000 in a calendar year. You must register and pay VAT from the sale which causes you to exceed this amount, including that transaction.
Supplies of goods and services should be specified as sector code "DK01".
Some goods and services are already exempt from VAT in Denmark
If you only sell goods and services that are exempt from VAT, you should not apply for VAT exemption through the scheme.
Services within these areas are exempt from VAT in Denmark:
- Healthcare services provided by a qualified practitioner, e.g. doctor, dentist, optician, psychologist, physiotherapist, chiropractor, chiropodist/podiatrist, or registered alternative practitioner (RAB)
- Social care and assistance services, but not interpretation, coaching, lifestyle advice, or stress treatment
- Care services, but not homecare covered by the free-choice scheme, or general housekeeping
- School education, education at higher education institutions, vocational education, retraining, or other academic or vocational teaching
- Non-commercial sports and athletic activities and sports events without professional practitioners
- Cultural activities, e.g. admission to a museum, art exhibition, zoo, aquarium, or botanical garden, but not radio, television, cinema, theatre, concert, animal show, or amusement park
- Artistic activities, e.g. remuneration of authors, composers, musicians, lecturers, literary translators, but not the sale of art objects (which are however subject to a specific threshold), or of copyrights
- Sale and rental of real estate, but not short-term rental or hotel, camping, parking, advertising space, or storage rooms
- Transportation of persons, but not by tourist bus
- Financial activities, e.g. lending, security, and guarantee provision, placement of funds, transactions in currency, cash, and securities and investment funds
- Lottery and gambling
- Undertakers
- Investment gold
- Blind persons' sales of goods and services of no more than DKK 170,000 annually
If you are a charitable association that does not have sales of a commercial nature, you should not apply for VAT exemption through the scheme.
You may be subject to other taxes in Denmark
Even if you are exempt from VAT in Denmark, there may be other taxes that you must report and pay.
Payroll tax
If you sell VAT-exempt services, you will often be subject to payroll tax instead. The tax is based on the company's wages to its employees and/or the company's taxable profits.
Read on about payroll tax in Denmark
Excise duties
If you sell goods or services that are subject to excise duties, you must be aware of the rules for registration and payment.
First-time sales of certain works of art (DK02)
If you have turnover from first-time sales of certain works of art, you must register for VAT when your total turnover exceeds DKK 350,000 in a calendar year.
However, you are still subject to the general VAT threshold. This means that you must still register for VAT when your turnover from other goods and services exceeds DKK 50,000 in a calendar year.
You must register and pay VAT from the sale which causes you to exceed either amount, including that transaction.
Supplies of first-time sales of certain works of art must be transmitted by the Member State as sector "DK02", or in case of free-text entered by the small enterprise, as "DK02", "works of art" or "artworks".
Works of art subject to this threshold
Only specific types of physical artistic objects are included under the threshold.
Artisanal goods of a commercial nature, e.g. crafts or handmade commercial goods for decoration and ornamentation are not included.
Types of objects included under the threshold
- Goods falling witihin CN 9701 (paintings, collages etc., drawings, and pastels, executed entirely by hand), and goods falling witihin CN 9702 (original engravings, prints and lithographs).
- Sculptures falling witihin CN 9703, created by the artist, including up to 8 castings of a sculpture. The limit of eight copies may be exceeded for statuary casts produced before 1 January 1989, if the sculpture cannot be considered a good for resale.
- Tapestries and wall textiles falling witihin CN 5805 and 6304 made by hand from original designs provided by artists, provided that there are not more than eight copies of each
- Individual pieces of ceramics executed entirely by the artist and signed by him
- Enamels on copper, executed entirely by hand, limited to eight numbered copies bearing the signature of the artist or the studio, excluding articles of jewellery and goldsmiths' and silversmiths' wares;
- Photographs taken by the artist, printed by him or under his supervision, signed and numbered and limited to 30 copies, all sizes and mounts included.
Only first-time sales are subject to this theshold
The first time an object is sold, i.e. when ownership is transferred against payment, is a first-time sale. Your total annual turnover from such first-time sales is subject to this threshold regardless of the number of works you have sold.
Other forms of economic utility from the object are not included under this threshold. These include rental, leasing, royalty agreements, etc., which should instead be included under the threshold for goods and services.
It is your responsibility to document that a sale of a work of art is a first-time sale, i.e. if you did not create the work of art yourself, but acquired ownership of it through a gift, inheritance, or from the distribution of an estate.
Domestic SME scheme
A small enterprise established in Denmark who applies the SME scheme in Denmark (the domestic SME scheme) is released from the following VAT obligations:
- to state the beginning of its activity
- to register as business
- to register for VAT
- to submit periodical VAT returns
- to submit administrative statements
Cross-border SME scheme
The cross-border SME scheme applies when a small enterprise established in Denmark wants to apply the SME scheme in other Member States, or when a small enterprise established in another Member State wants to seek VAT exemption in Denmark.
Simplified VAT obligations
VAT registration in each Member State where a small enterprise established in Denmark seeks to apply the SME scheme is replaced by a single application to be submitted in Denmark. The small enterprise must first be registered in the Danish central business registry, CVR.
VAT registration in Denmark when a small enterprise established in another Member State seeks to be VAT exempted, is replaced by a single prior notification to be submitted through the Member State of establishment.
The periodical VAT returns are replaced by a single quarterly report for all Member States to be submitted in the Member State of establishment.
Currency
The values of supplies of goods and services in the application and updates to it as well as quarterly and final reports must be indicated in DKK.
Values of supplies of goods and services submitted through other Member States must be transmitted in EUR.
Way of submission
Application, update, reporting, and cessation for small businesses established in Denmark must take place through the Danish Tax Administration's self-service portal, E-tax.
Additional simplified VAT obligations and sanctions
Exempt small enterprises applying the cross-border SME scheme in Denmark are released from the obligation to issue full invoices for B2C supplies, when the single supply does not exceed DKK 3,000.
If an exempt small enterprise has indicated VAT on its invoice by mistake, the amount must be paid to the Danish Tax Administration, if not corrected towards the buyer. Violation of this rule is a criminal offence.
An exempt small enterprise which does not comply with its reporting and information obligations may be subject to a fine.
Transitional period
Denmark does not apply any transitional period in case the VAT thresholds are exceeded during the current calendar year.
You must register and pay VAT from the sale which causes you to exceed the threshold, including that transaction.
Quarantine
Quarantine period in case of exceedance of a VAT threshold
A small enterprise excluded from the SME scheme in Denmark due to exceedance of the EU threshold is not able to benefit from the scheme during that calendar year and the following calendar year.
A small enterprise which has had its VAT exemption in Denmark revoked due to exceedance of a Danish VAT threshold is not able to benefit from the scheme during that calendar year and the following calendar year.
Quarantine period in case of voluntary departure from the SME scheme
There will be no quarantine period imposed.
Quarantine period in case of voluntary VAT registration in Denmark
A small enterprise which registers for VAT in Denmark during a year in which its turnover does not exceed a VAT threshold, must stay registered for at least two calendar years.
Appeals
Domestic SME scheme
There is no prerequisite to apply the domestic SME scheme.
Cross-border SME scheme
Denmark as Member State of establishment (MSEST)
You should follow the instructions to appeal contained in the decision document from the Danish Tax Agency.
Denmark as Member State of exemption (MSEXE)
You should follow the instructions to appeal contained in the decision document from the Danish Tax Agency.
Another state as Member State of exemption (MSEXE)
You should follow the instructions to appeal contained in the decision document from the Member State of exemption, or contact the national tax administration for guidance.