The company collects the VAT and passes it over to the State every three months - if it is a start-up business.
VAT is thus not a tax which the company will have to pay, it should just
collect it. The company is then allowed to keep the collected VAT three or six
months depending on the type of business.
Companies do not pay VAT
When a company buys a product or service in Denmark it pays the VAT the seller has put on their sales price. But when the VAT is settled with the tax department (SKAT) the VAT you have paid to other companies is deducted from the VAT you have collected. You will only pay the difference between the money collected and the VAT money you have paid to other companies.
The company´s accounting program automatically calculates this.
The example below shows the principle of the collection of VAT and settlement of VAT.
Most companies are obliged to keep VAT accounts. There
are few exceptions from the VAT duty, e.g. general practitioners, dentists, cab
driving and education.
Many people see registration for VAT equal to "starting business". In a sense this is correct, as VAT registration is the single formal thing you under all circumstances must do to "get in business".
You get your VAT registration number at the same time as you get you register your business - get your CVR number.
Output tax is the
VAT you charge on your sales and which you have to pay to SKAT (the Danish
Central Customs and Tax Administration). Earlier known as output VAT. When you
sell a commodity at, say, 100 Dkr. you must add 25% to the amount.
When must output tax be added? If you are in doubt you should consult SKAT or your accountant, but usually it is very easy: Most companies must charge output tax on their total sales.
Input tax is the VAT you pay to your
suppliers which is set off against the output tax payable. If you buy at 60 Dkr.
+ VAT, you pay a total of 75 Dkr., but the 15 Dkr. are returned from SKAT,
either directly or by setting off against the output tax payable.
The fundamental principle is as logic as for output tax. Just like most companies are liable to charge output tax on all sales, the input tax on their expenses is allowable against the VAT accounts.
A number of rules apply to retailing. Any VAT registered company can consult SKAT who will offer their help and assistance in answering questions.
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