Visma News
Finance - Q3, 2014

This newsletter presents the recent changes, deadlines, information regarding VAT, tax, new regulations and many other financial aspects of interest to small entrepreneurs and up to large international groups. 

If you have any questions we are always ready for a consultation free of charge.
 

Consider your tax before New Year

It is often worthwhile to consider the possibilities of saving or postponing tax before New Year. The following are some areas that are relevant to look at.

 

Purchase of operating equipment and cars

If the business is about to acquire machinery, cars etc., it will often be a good idea to make that purchase before the New Year. This is because you can write off 25 percent already in the year when the operating equipment is purchased and delivered to the business, regardless of when during the year the purchase is done. In the case of minor assets, furniture and the like that cost less than 12,600 DKK pr. pcs., the entire amount can be deducted in the year of acquisition.

Insurance / pensions, incl. 30-percent scheme

You may obtain tax savings and/or tax deferrals if you transfer an amount to your pension scheme or life insurance scheme.

If you pay the top tax rate, you can save tax by depositing on a rate scheme. From 2014, there is a ceiling of 50,900 DKK annually on deposits to rate pensions. You can deposit an additional amount to an annuity pension.

Self-employed can deposit and deduct up to 30 percent of their net profit (before interest, etc.) on a rate pension or an annuity pension (how is described in another article).

Withdrawals of the business

If you use the company tax scheme, the size of the withdrawals of the business will, in some cases, be very important for this year’s taxes. It is therefore important that the business does not withdraw excessive amounts. In some cases, it is a good idea to optimize up to the limit of the top tax rate.

Save interest by paying outstanding tax before the 31 December 2014

If you expect to have to pay outstanding tax, it might be worthwhile to make a voluntary payment of outstanding tax before New Year. If you pay the outstanding tax before the 31 December 2014, you avoid interest and surcharges on the outstanding tax. If you pay the outstanding tax between the 1 January 2015 and the 1 July 2015, you will have to pay a percentage surcharge of 5%. If you do not pay the outstanding tax before the 1 July 2015, the first 18,700 DKK (2014 figures) will be included in the advance tax payment for 2016 with a surcharge of 5%. If the outstanding tax exceeds 18,700 DKK, the surplus amount will be charged in three installments with a surcharge of 5%.

Advance corporate tax

You will soon have to decide if you want to pay advance corporation tax.

To find out whether you should pay in advance, you have to look at whether you expect to pay outstanding tax in November 2015, or whether you think the fixed interim rates are covering the expected corporate tax for 2014.

Calculations by PWC shows that if you pay the estimated residual tax in November 2014 you will have a rate of return of 5.7% before tax. This means that if you have excess liquidity with an interest rate of less than 5.7% it will be worthwhile to pay voluntarily. The same applies if you can borrow for less than 5.7%. However, the calculation looks different if you end up with a tax refund, for which you will only achieve a rate of 1.1% on the excess amount.

Do you remember to get refund on electricity and water expenses from the Danish Tax Administration?

Electricity tax:

What can be reimbursed?

Most businesses can get the electricity tax reimbursed to the same extent as the VAT deduction of the business.

Businesses can usually reclaim tax on electricity, since electricity generally is considered used for process purposes, for which the taxes are reimbursed. Process Purposes are for instance electricity used for the operation of machines, facilities, computer equipment, pumps and motors.

Electricity tax that cannot be reimbursed

Service Businesses

Regardless of whether the electricity consumption is related to the turnover of taxable services, it is normally not possible for service businesses to get a reimbursement of their electricity tax.

The types of service businesses that normally cannot get their electricity tax reimbursed are:

  • Lawyers
  • Architects
  • Agencies (excluding travel agencies, tourist offices and property management)
  • Entertainment businesses, including theater plays and cinema shows
  • Realtors
  • Advertising businesses
  • Auditors
  • Consulting engineers

 

Water tax:

What can be reimbursed?

VAT registered businesses can normally get their water tax reimbursed to the same extent as the VAT deduction of the business. If the business can deduct VAT, the business can reclaim the water tax, which is 5.46 DKK per m3 of water (2014 figures).

Buyer may be denied VAT deductions if the invoice does not meet the invoice requirements

In some cases, the Danish Tax Administration has denied the deduction of input VAT because the invoices did not meet the formal requirements, for instance due to lack of invoice number or because the vendor's VAT number was not on the invoice.
It is therefore important that your business knows the requirements for a correct VAT invoice according to the VAT Order, § 61, sentence 1.

There are a number of requirements for the content of a complete invoice. These requirements also apply to billing tickets, credit notes and electronic invoices.

A complete invoice must contain:

  • issue date (invoice date)
  • a consecutive number based on one or more systems which uniquely identifies the invoice
  • the VAT number of the seller (the Danish “CVR number”)
  • name and address of the seller
  • name and address of the buyer
  • the amount and type of the delivered goods or the extent and type of the services provided
  • the date when the delivery of the goods or services was made or completed, if the date is different from the issue date (invoice date)
  • the VAT base, price per unit without charge, any price reductions, premiums and discounts, if they are not included in the price per unit                    
  • the applicable VAT rate
  • the amount of VAT payable.
When supplying goods and services to other EU countries the following must also be stated:
  • the VAT number of the receiver
  • the invoice shall also include a statement saying whether the supply is exempt from VAT (goods) or covered by the reverse charge mechanism (services)

There are special rules for deliveries of used goods, and more flexible rules for minor sales or sales mainly to private buyers (simplified invoices or receipts).

 

2014 is the last chance for self-employed to use the 30%-rule on annuity pension

2014 is the last year when you have the option to pay up to 30% of the profit of your business before interest to an annuity pension - without being tied to a specific payment amount in the subsequent years.

The 30% of the business’ profits can be paid into an annuity pension until and including the 31 December 2014.

From the 1 January 2015, you can pay 30% of the business’ profits each year to a pension for life and another 50,900 DKK to an annuity pension.

The 30%-rule takes the specific conditions of self-employed people into account since their profits can vary from year to year. You can simply save when you have the possibility.

Few people know the accurate size of their profit when approaching the end of the year. The payment to the pension scheme is therefore determined based on an estimated size of profit. If it later turns out that the surplus is smaller than expected and that you have paid too much to your pension scheme, the excess amount (the amount that exceeds 50,900 DKK) can be withdrawn again without tax consequences.

Follow this link to get on overview of the different types of pension schemes (in Danish)

Digital mailboxes for companies

It has been compulsory by law for a while that companies must have a digital mailbox. If you need help getting or managing your digital mailbox, we are available.

The volume of post sent to the digital mailboxes is steadily increasing, for instance are demands of payment from ATP being sent digitally now, so we would advise you to open your digital mailbox as soon as possible if you haven’t done it already.

Visma offers a solution where we help our clients to access the mailbox while we manage the received post. We make sure that all mails are sent to the correct recipients.

Digital mailbox for persons

From 1 November 2014 it is mandatory to have a digital mailbox if you are more than 15 years of age and has a social security number in Denmark.

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