New initiatives approved to raise companies’ cash positions due to Covid-19

On March 17, 2020 the Danish Government approved a new bill to postpone the payments of employer tax and the reportings and payments of VAT.

This is due to the Covid-19 virus, which is expected to have severe negative consequences on the Danish economy. Therefore, the Danish Government wishes to accommodate the negative impact of the Covid-19 by protecting the companies’ financial positions by postponing the payments of employer tax and VAT. As a supplement, it has also been approved, that the payment limits of the tax accounts of the companies at the Danish Tax Agency will be raised from DKK 200,000 to DKK 10,000,000.

Deadline changes for payments of employer tax and labour market contribution

The deadline for payments of employer tax (A-skat) and labor market contributions (AM-bidrag) for April, May and June will be postponed and the new deadlines for companies are determined by the business classification as a small, medium or large company.

A large company is a company that during a 12 months’ period prior to the current calendar year has reported or paid minimum DKK 1,000,000 in employer tax or DKK 250,000 in labor market contributions. Usually, a large company must report and pay employer tax and labor market contribution no later than the last weekday of the month, in which the reporting governs. Small and medium-sized companies must report and pay the taxes no later than the 10^th in the following month after the particular period.

Please note that it is only the payments, which are postponed. Therefore, the usual deadline for reporting A-taxes and labor market contributions are still applicable. The deadline of reporting the A-taxes and labor market contributions follow the classification of the company as described above.

The new payment deadlines are summed up below:

Deadline changes for B-tax and labour market contributions

To help independent contractors and freelancers the B-tax scheme for April and May are also postponed until June and December. Usually B-tax is charged annually by ten rates where June and December are months without payments. This has been changed to April and May meaning no instalments are applicable for B-taxes within these months. Instead, the rate for April is payable by June 1, 2020 with June 20, 2020 as the last day of payment. The rate for May is postponed to 1 December 2020 with December 20, 2020 as the last payment date. Kindly notice that June 20th and  December 20th are not weekdays therefore the actual last day is June 22, 2020 and December 21, 2020.

Change of reporting and payment of VAT

Besides the changes of employer taxes the Danish Government also approved postponing the deadlines for VAT filings. The new deadlines are dependent of the company’s actual VAT reporting frequency.

Monthly VAT reportings

The monthly VAT reportings for March, April and May are postponed one month. Normally monthly VAT is payable no later than the 25 day the following month after the particular month.

The new VAT deadline for monthly VAT reportings are indicated below:

Quarterly VAT reportings

Companies filing VAT reportings on a quarterly basis will experience a consolidation with respect to the first two quarters of 2020. The deadline for the first quarter of 2020 is no longer June 1, 2020 but following the deadline for the second quarter, which is September 1, 2020. At September 1, 2020 the company must file and pay two VAT reportings (if both reportings are positive) because the deadline of the first quarter is postponed to 1 of September 2020. If the company is submitting VAT for the first quarter before June 1, 2020, the consolidation is not applicable. If you expect to claim negative VAT for the first quarter it might be beneficial to report VAT as usual because the Danish Tax Agency still returns negative VAT. This will free up cash for companies before 1 of June instead of waiting until September.

The consolidated quarters are shown below:

Semi-annual VAT reportings

Companies filing VAT reportings twice a year also have the possibility to wait with VAT reporting for the first half of 2020. In this situation, the deadline for the first half of 2020 is consolidated with the deadline of the second half of 2020, which is March 1, 2021. In practice, it is also a consolidation meaning VAT for 2020 can be reported and paid by 1 of March 2021. Companies following this consolidation must report and pay VAT for each half year by March 1, 2021 so two reportings are applicable. If a company expects to have negative VAT the first half of 2020 it may be beneficial to report VAT as usual and claim the negative VAT in accordance with the usual deadline.

Raise of payment limit for the tax account at the Danish Tax Agency

Because of the increase of liquidity within the Danish companies, the Danish Government has also decided to raise the payment limit of tax accounts for companies at the Danish Tax Agency until November 30, 2020. The normal payment limit is DKK 200,000 but until end of November it is possible to raise it to DKK 10,000,000. The payment limit means that if the company has set the payment limit to DKK 200,000 the Danish Tax Agency will not refund positive amounts on the tax accounts less than the payment limit. Practically, the payment limit serves as a company buffer at the Tax Agency and if no payment limit is determined, the Tax Agency refunds any amounts not recognized on the account.

Increasing the payment limit, is to avoid companies with higher cash positions to be subject to negative interest of their cash balances at Danish banks. With this new bill, companies cash positions should be increased by raising the payment limit. Companies can voluntarily pay excess amounts to the tax account to avoid the negative interest.

Tuesday 17 March 2020 the Danish Government adopted this proposal with immediate effect. The increase of a company’s tax account can be done from Wednesday 25 March 2020.