Denmark: New VAT rules regarding transport services

Intended to bring the Danish VAT rules in line with the CJEU case law

Intended to bring the Danish VAT rules in line with the CJEU case law

Effective 1 July 2022, subcontracting services in the form of transporting goods outside the EU are no longer exempt from value added tax (VAT).

This change of the practice of the Danish tax agency flows from a judgment of the Court of Justice of the European Union (CJEU), and is intended to bring the Danish VAT rules in line with the CJEU case law.

The new rules mean that the VAT exemption will only be available to a company that directly invoices the sender or recipient of goods for export outside the EU. In other words, the VAT exemption is available when the services are provided directly to the exporter, importer or recipient of the goods. Subcontractors that do not directly invoice the exporting transport buyer will generally have to apply VAT.

In general, with the new rules, shipping, carriers, and other companies that perform subcontracting services related to exports to countries outside the EU will need to invoice their service according to Danish VAT rules:

  • As a VAT-exempt EU sale (reverse charge) to be reported in Box B - Services if the invoice is to be sent to an EU customer or company
  • As a VAT-exempt sale to be reported in Box C if the invoice is to be sent to a customer or company established outside the EU

The rules thus require that the VAT return will need to be reported differently, and that financial and transport systems must be corrected so that the invoices for covered services include VAT.

Additionally, companies will have to pay an “interest surcharge” if they owe VAT to the Danish tax agency. If the subcontractor does not correctly charge VAT on services, for example, provided to a Danish customer, and continues to apply the VAT exemption in violation of the new practice, the Danish tax agency will be able to impose interest at a rate of approximately 8% per annum on the amount of VAT that should have been charged.

KPMG observation

With this rule change, it will be important that companies are identified—whether or not they are considered to be subcontractors. This can give rise to a number of questions such as who are the parties to the contract, and where does the invoicing take place. Similarly, buyers of subcontracting services need to be aware that their obligations in relation to the settlement and reporting of VAT will change, and this could require updates to their financial and transport systems.

Danish transport companies that use subcontracting services, therefore, need to be aware that they may need to settle and report VAT on subcontracting services.

Read a June 2022 report (Danish) prepared by the KPMG member firm in Denmark

 

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