News - Finance, payroll and HR, Q1 - 2017

Here we present the recent changes, deadlines and information regarding finance, payroll and HR matters from Q1 – 2017 of interest to small entrepreneurs and up to large international groups.

 

Real owners

On March 1, 2016, the Danish Parliament adopted an amendment to the Companies Act and several other acts arising out of the fourth Money Laundering Directive. The adopted bill means that companies must register their real owners. Covered business types have a duty to report the company's true owners. Registration must take place as soon as possible after becoming aware that the concerned person is the real owner. This must be done digitally via the Danish Business Authority's IT system.

The bill is expected to become effective in the first half of 2017.

With some exceptions, all companies are covered by the bill if they meet the definition of a legal unit. This means limited companies, entrepreneurial companies, limited partnerships, partnerships, foundations and associations. Listed companies, affiliates, sole proprietorships and employee investment companies are not covered.

A real owner is ultimately always a physical person. According to the bill, a real owner is one or more physical persons who ultimately own or control a sufficient share of the company's shares or voting rights. There is a presumption that there is real ownership through a shareholding of 25% or more of shares and voting rights. It is worth noting that ownership may be direct or indirect, as for example through a holding company.

Did you know that a violation of the personal privacy law in the future could result in fines of up to EUR 20 million?

The new Personal Privacy Regulation goes into effect on May 25, 2018. The regulation imposes requirements on companies processing of personal data and is a tightening of the existing rules of the Personal Privacy Act. Although May 25, 2018 is still a long way off, it is important that companies are already preparing to comply with the new rules of the regulation, and first and foremost, get an overview of the data they hold and how these data should be handled.

The purpose of the new regulation is to increase individual’s data security, standardize the rules across the EU and ensure easier cooperation between countries and authorities. Most of the rules in the existing Personal Privacy Act will continue to exist in the new regulation, but new and stricter principles will also apply.

The innovations introduced include increased demands on the following principles: consent, disclosure, documentation requirements, the right to be forgotten, data portability, reporting, impact assessment, appointment of a security officer – a so-called "DPO" (Data Protection Officer) and a tightening of sanctions.

In the event of a violation of the new Personal Privacy Regulation rules, companies risk a fine of up to EUR 20 million or 4% of its global turnover. If the latter amount is greater, this will be used as the basis of calculation.

At Azets HR Legal, we can help you to get an overview, so that you are ready to comply with the new requirements. During 2017, we will organize seminars on the subject, and we can offer you "to-do-lists", timetables, draft agreements, etc.

Employee shares and reporting requirements

According to the previous rules, employees were taxed on employee shares on the acquisition date based on the Assessment Act §§ 16/28.

In May of this year, the Danish Parliament adopted the reinstatement of the previously favorable tax rules for the allocation of shares and options for employees. If the employee and employer sign into an agreement on an employee share plan, the employer has a duty to report employee share acquisition, etc. to the Danish tax authorities (SKAT). The new rules in the Assessment Act § 7P apply to agreements concluded on or after July 1, 2016, and if they qualify, they may be taxed under the new favorable arrangement.

A number of conditions apply for the use of the employee share plan under the Assessment Act § 7P. The most important condition is that the value of the remuneration does not exceed 10% of employees' annual salary at the acquisition date and that it is clear from the agreement that Assessment Act § 7P applies.

Reporting in “eIndkomst”

Employee share plans under the Assessment Act §§ 16/28 must still be reported in “eIndkomst” on the acquisition date.

Reporting in ”eKapital”

The Danish tax authority’s reporting system “eKapital” applies to income and deductions as well as assets and liabilities that are not to be reported via “eIndkomst”. Dividends on shares as well as shareholdings, etc. on deposit and the acquisition and disposal of shares must be reported in “eKapital”.

Reporting shall be done by January 20 of the year following the year in which the allocation of the remuneration in the form of shares subject to the Assessment Act § 7P is assigned. Subscription and purchase rights must also be reported no later than January 20 of the year following the subscription or purchase year.

The reporting requirement applies from July 1, 2016. The reporting must be made to the Danish tax authorities in cases where there have been stock purchases/sales during the year, that is, if the trade date falls within the income year.

If reporting deadlines are not met, the company may be subject to a daily fine.

Voluntary on-account instalments

Companies, etc. may postpone an expected outstanding tax for the tax year 2016 until February 1, 2017 (third instalment).

It is easier for companies to calculate the final outstanding tax on February 1, 2017 rather than in November. The company more likely knows their estimated taxable income and can therefore report more accurately.

If the Company does not estimate the reported on-account instalments (March/November) adequately to cover the actual taxes for the 2016 income year, it can be advantageous to supplement with a third voluntary instalment. This can be an advantage because the company thereby avoids having to pay a non-deductible outstanding tax fee with a payment in November, which for the 2016 income year is 3.4%.

In addition, a so-called third voluntary payment can also be made no later than February 1, 2017 (third on-account instalment).

However, be aware that for a voluntary payment in March, the fee is waived, whereas a fee is charged for voluntary payments in both November and in February 2017. For 2016, the fee for March/November payments is 0%, whereas the fee for the voluntary third payment is 0.7%.

Considerations on interest rates

If the company has the necessary excess liquidity, it can be advantageous to consider paying the outstanding tax on-account instalment and only pay the 0.7% outstanding tax fee.

Conclusion

Our assessment is that for companies or affiliates in Denmark with large surpluses and excess liquidity, it can be advantageous to consider paying the voluntary tax on account, to avoid the payment of non-deductible interest.

Contact one of Azets' consultants if you want advice about a possible voluntary payment of tax on account for companies.

Invoice requirements

When you start a business, you must be aware that there are some legal and formal requirements for the formation of a sales invoice.

Most accounting systems today have this feature built in, and we therefore strongly recommend that you use these systems, not only to develop the invoice, but also for bookkeeping.

The following are the requirements that the Danish tax authority describes on its website:

An invoice for trade within the EU should contain the same information as for domestic trade – that is, information about:

  • Issue date (invoice date).
  • Consecutive number, based on one or more series, which uniquely identifies the invoice.
  • The seller's name, address and VAT number.
  • The buyer's name and address.
  • The delivery.
  • The amount and nature of the goods supplied.
  • The date on which the delivery of goods is made or completed or when a down payment should be made, but only if the date is fixed (for example, delivery date), and it is different from the invoice date.
  • The VAT base, price per unit without VAT, and any discounts, refunds and rebates if they are not included in the price per unit.

If in a particular situation there is to be charged Danish VAT (for example, by sale to a non-registered business or private person), the following must also be added:

  • The VAT rate (in Denmark, 25 percent).
  • The VAT amount to be paid. If invoiced in a foreign currency - other than the Euro - the tax amount must be stated in Danish Kroner, or the conversion rate for the Danish Kroner must be stated in the invoice. The seller and buyer must therefore apply the same VAT amount in Danish Kroner.

When selling to a VAT registered business in another EU country (including tax-exempt companies, registered for goods purchased in other EU countries) do not specify the amount of VAT, but the company must pay VAT in another EU country. However, the invoice should provide further information on:

  • Country code associated with a VAT number (DK + 8-digit CVR / SE number).
  • The customer’s country code and VAT number.
  • That VAT has not been charged. This information may be given in one of the following ways, at the seller’s discretion:
    • Reference to the relevant provision of the VAT Act, for example, exempted under VAT Act §34, paragraph 1.
    • Reference to the relevant provision of the VAT System Directive, such as article 138.
    • Or by another distinct relevant endorsement, for example, "zero-rated", "free of VAT" or the like.
When selling to a non-registered company in another EU country, the invoice must show the calculated Danish VAT. This does not apply if you are registered for sales in the recipient country. In that case, you must calculate the VAT using the recipient country's VAT rate.