Azets News Finance - Q4, 2015
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.
Reintroduction of bill on voluntary tax on account, the tax account, etc.
In our newsletter for Q3 2015, we mentioned that it was possible that the draft bill regarding changes to the interest rates payable by companies on underpaid tax and overpaid tax and an upper limit to the tax account would be reintroduced. This happened on 3 July 2015.
As early as on 1 September 2015, SKAT (the Danish Customs and Tax Administration) introduced an upper limit to the tax account of DKK 200,000 for deposits that are not counterbalanced by a specific payable amount.
In respect of repayment of voluntary payments of tax on account, negative interest will be introduced when the repayment is made in specific periods.
The draft bill also introduces the possibility of paying voluntary tax on account until 1 February in the year following the income year. This means that companies with income year 2015 may pay tax on account until 1 February 2016.The bill was passed on 26 August 2015 and took effect on 1 September 2015.
Voluntary payment of tax on account in November 2015
The surcharge payable on voluntary payments of tax on account paid until 20 November 2015 has still not been fixed and will not be announced until mid-December. Also, it is uncertain how payments made from 21 November 2015 until 1 February 2016 will be treated. It may therefore be difficult to calculate whether it will be an advantage to pay voluntary tax on account before 1 February 2016.For advisory services regarding voluntary payment of tax on account, please contact one of Azets' consultants.
Increased digitalisation at the Danish Business Authority from 15 September 2015
As from 15 September 2015, the Danish Business Authority launches new digital solutions, which among other things means that, in future, exemption statements, annual reports of foreign companies having a branch in Denmark and the consolidated financial statements of the immediate parent company must be filed as a PDF file via the self-service solution.
It is still the responsibility of the reporting party to ensure that the final financial statements have been filed with the Danish Business Authority.
In future, the documentation that the filed financial statements have been prepared, perhaps audited and approved, must be preserved for five years compared to three years under the previous Danish Executive Order on Filing and Publication of Annual Reports, etc. The Danish Business Authority may require that the reporting party submits such documentation.When the financial statements are signed, NemID may be used in future as an alternative to the handwritten signature.
The new Danish Financial Statements Act 2015
Azets will hold a breakfast meeting on 19 November 2015 from 9.00 - 10.30, at which we will give an account of the amendments to the new Danish Financial Statements Act. Below, we briefly describe the amendments. As the adopted Act includes more than 150 amendments, we will not discuss all of them but will focus on the amendments that we find most significant:
- The amendments are effective for financial years starting on 1 January 2016
- The amendments are effective for financial years ending on 31 December 2015
- Under reporting class B companies, microenterprises have been introduced
- Reduced disclosure requirements for microenterprises
- Some note requirements have been abolished, and others have been introduced
- Increase of the limits for reporting classes B and C(m) and C(s)
- New way of calculating revenue
- Changes to the financial statements forms – Schedule 2 to the Danish Financial Statements Act
- "Special items" are introduced
In addition, alignments have been made with IFRS; however, many differences remain between IFRS and the Danish Financial Statements Act.As regards the increase of the limits for audit, it is expected that the Danish Business Authority will make an announcement this autumn.
VAT on courses – draft of new guidelines
SKAT has issued new guidelines for the place of delivery for courses of longer duration. It is proposed that courses of longer duration (e.g. more than 25 days) should now comply with the main rule, i.e. the place of delivery is the place of the invoice recipient (reverse charge) and will not as previously be subject to Danish VAT. In future, this will usually not be the case.If the courses are of shorter duration, e.g. seminars and conferences, Danish VAT will still be payable.
Potential full VAT deductions for shares acquired by "active" holding companies
In its decision of 16 July 2015, the Court of Justice of the European Union ruled that consultancy fees relating to the acquisition of shares are VAT deductible in full. This applies if the intention is that the holding company/acquiring company will deliver administration services liable to VAT to the acquiring subsidiaries.
According to Danish legal practice, VAT deductions for consultancy fees have up till now been very limited.The decision implies that Danish "active" holding companies may now claim full VAT deductions, and it is possible that there will be a claim for repayment against SKAT if VAT has erroneously not been deducted.
Guidelines from SKAT regarding joint taxation
In connection with their new digital system for reporting corporate income tax returns, SKAT has issued several different guidelines regarding joint taxation.
These guidelines provide details concerning change of income year and joint taxation that is part of a major joint taxation arrangement in the form of a subordinate joint taxation.
Change of income year
The guidelines provide details concerning the income year of newly formed companies and how the administrative company in the joint taxation arrangement may change the income year without permission.
Subordinate joint taxationA subordinate joint taxation arrangement is established when an existing joint taxation arrangement is transferred to a new group. The jointly taxed companies in the "old" joint taxation arrangement may continue to utilise the losses of the "old" jointly taxed companies although the "new" companies in the joint taxation arrangement cannot utilise the losses. The new guidelines concerning joint taxation provide details on the continuation of the subordinate joint taxation arrangement although the companies are transferred in different transactions. Moreover, the guidelines explain how subordinate joint taxation may be delimited in case of restructurings.
Reintroduction of deduction for wage costs in connection with household services (servicefradrag/håndværkerfradrag)
The deduction for wage costs in connection with household services has been reintroduced with retrospective effect as from 1 January 2015. The arrangement in 2015 will be the same as in 2014. Around 1 October, you may report your deductions for the 2015 annual assessment of taxable income in a special module, so remember to keep the receipts. Furthermore, from 1 October, you may change your preliminary tax assessment in order that you may increase your deductions for the last months of 2015.
- The deduction may not exceed DKK 15,000 per year, incl. VAT.
- You may only deduct wage costs.
- The work performed must be on the list of approved services; see the list on SKAT's website.
- You must pay for the work no later than 29 February 2016.
- Only spouses and cohabitants with shared economy may share the deduction regardless of who paid for the work. Each spouse/cohabitant may make deductions of up to DKK 15,000. The amount is not automatically transferred between spouses, and therefore each spouse must enter his/her share.
- Other members of the household may only claim deduction for wage costs if they have paid an amount corresponding to the deduction. The amount must be paid electronically, either to the workman or to the member of the household who paid the amount to the workman.
- Only the owners of a holiday house (and their spouses) may deduct wage costs relating to the holiday house.
- If the deduction concerns a permanent habitation house, you must live in the house while the work is performed.
- If you have both a permanent habitation house and a holiday house, you are still only allowed to deduct a maximum amount of DKK 15,000.
- You must be subject to the usual tax liability in Denmark and be 18 years or older before the end of the year when the work was performed.
Equalisation scheme for maternity/paternity contributions for self-employed persons
All self-employed persons must now pay to the equalisation scheme for maternity/paternity contributions. Self-employed persons are independent businessmen and fee-based employees who earn income that is not taxed at source (B-indkomst). SKAT decides who is self-employed.
The equalisation scheme for self-employed persons compares SKAT's information with information reported to ATP (the Labour Market Supplementary Pension Scheme) in order to find out whether you must pay full, partial or no contribution.
If you have made payments to ATP because you have been a salary earner or because you have received transfer payments during the year, your contribution may be reduced.
Can I leave the scheme?
The equalisation scheme for self-employed persons is a compulsory scheme for independent businessmen and fee-based employees who earn income that is not taxed at source.
All self-employed persons are automatically included in the scheme. However, you do not have to pay to the scheme if you are under 18 or over 64 years.
What will it cost?
The full annual contribution in 2015 is DKK 328. If you have been a salary earner part of the year, your contribution may be reduced. The contribution charged for 2015 has been calculated based on your employment in 2014. The contribution is deductible.
Sustainable power facilities and property bought for children by parents
If you are only registered as a self-employed person because you own sustainable power facilities for which the agreement was concluded no later than 19 November 2012, you must file a copy of the binding installation agreement with the equalisation scheme for maternity/paternity contributions for self-employed persons. Hereafter, SKAT will decide whether you may be exempted from paying the contribution.If you are only registered as a self-employed person because you let out an owner-occupied dwelling to your child/children, you must file a copy of the registration certificate and a copy of the tenancy agreement to the equalisation scheme for maternity/paternity contributions for self-employed persons. Hereafter, SKAT will decide whether you may be exempted from paying the contribution.
How does the preliminary tax assessment work?
The preliminary tax assessment is your overview of SKAT's estimate of the taxes payable by you during a year. It is your responsibility that your preliminary tax assessment is correct and adequately reflects your income and property, i.e. salaries, profit on business activities, interest, etc.
The preliminary tax assessment is based on an estimate
Each year in November, SKAT sends out a preliminary tax assessment based on an estimate of your expected income and deductions for the coming year. The information recorded by SKAT may be up to two years old and is based on your most recent annual assessment of taxable income.
The preliminary tax assessment for 2015 is thus based on the annual assessment of taxable income for the income year 2013 unless you have made changes to your preliminary tax assessment for 2014. Your information in the preliminary tax assessment for 2015 may therefore be up to two years old. Many things may change in the course of two years, and it is therefore important that you check your figures.
The preliminary tax assessment may be updated regularly
During the year, you may experience changes in your life that will affect your tax situation, including
- Increased or decreased profit on business activities
- New job
- Raising of new debt
- Reduction of debt
- Refinancing of existing loans
- Change of address
- Home purchase
The above changes in your life affect your preliminary tax assessment, and as the preliminary tax assessment may be changed on an ongoing basis, it is important that you update it regularly in order to ensure that you neither pay too much nor too little tax.
The preliminary tax assessment may be changed by SKATAfter the summer holidays, many taxpayers have experienced that SKAT has sent proposed changes to the preliminary tax assessment for 2015. This primarily concerns taxpayers who have large amounts of outstanding tax from 2014. In such cases, SKAT compares the preliminary tax assessment against the annual assessment of taxable income in order to determine whether the taxpayer will also have outstanding tax for 2015. If the taxpayer does not make any changes, the new assessment and the taxes computed will apply.