Ina Ree­se Tax & Legal Prac­ti­ce – Flens­burg | Harrislee

Trade with Denmark

Trade with Denmark

Busi­ness dealings with Den­mark: VAT, per­ma­nent estab­lish­ments and contracts

It takes ten minu­tes to get from Flens­burg to Pad­borg, and half an hour to Aaben­raa. For many busi­nesses in the regi­on, Den­mark is the­r­e­fo­re not an export mar­ket, but sim­ply part of their day-to-day busi­ness. The who­le­sa­ler sup­pli­es Danish cus­to­mers, the metal fabri­ca­tor is erec­ting a hall in Søn­der­borg, and the elec­tri­cal firm is sen­ding two fit­ters to a buil­ding site in Kol­ding for three weeks.

From a legal and tax per­spec­ti­ve, the­re is always a boun­da­ry to con­sider. For the Ger­man side, Ger­man VAT and inco­me tax law app­ly, as does the dou­ble taxa­ti­on agree­ment bet­ween Ger­ma­ny and Den­mark. In addi­ti­on, the­re are Danish report­ing and regis­tra­ti­on requi­re­ments. We high­light whe­re typi­cal mista­kes tend to occur in prac­ti­ce and how they can be avoided.

Deliveries of goods to Danish companies

If a Ger­man com­pa­ny sup­pli­es goods to a Danish com­pa­ny and the goods arri­ve in Den­mark, the sup­p­ly is exempt from VAT in Ger­ma­ny (Sec­tion 4(1)(b), Sec­tion 6a of the Ger­man VAT Act (UStG)). The Danish cus­to­mer pays tax on the purcha­se in Den­mark. The VAT exemp­ti­on is sub­ject to three con­di­ti­ons, which the tax office checks tho­rough­ly during a tax audit. Sin­ce 2020, a VAT regis­tra­ti­on num­ber and a reca­pi­tu­la­ti­ve state­ment have been expli­cit requi­re­ments for the exemption:

  • Customer’s valid VAT num­ber: The cus­to­mer must use a Danish VAT regis­tra­ti­on num­ber. Its vali­di­ty can be che­cked with the Fede­ral Cen­tral Tax Office (Sec­tion 18e of the Ger­man Value Added Tax Act (UStG)). The qua­li­fied veri­fi­ca­ti­on check also veri­fies the name and address and should be car­ri­ed out befo­re the first deli­very and regu­lar­ly thereafter.
  • Cor­rect sum­ma­ry decla­ra­ti­on: The deli­very must be included in the sum­ma­ry decla­ra­ti­on sub­mit­ted to the Fede­ral Cen­tral Office. If it is miss­ing or incor­rect, the tax exemp­ti­on will cea­se to app­ly until the decla­ra­ti­on has been cor­rec­ted. A cor­rec­tion has retroac­ti­ve effect. The return must be sub­mit­ted by the 25th of the fol­lo­wing month. If the value of the sup­pli­es did not exceed 50,000 euros in eit­her the cur­rent quar­ter or any of the four pre­ce­ding quar­ters, a quar­ter­ly return is suf­fi­ci­ent (Sec­tion 18a of the Value Added Tax Act).
  • Pro­of that the goods have arri­ved in Den­mark: The stan­dard docu­ment is the con­fir­ma­ti­on of receipt (Sec­tion 17b of the VAT Imple­men­ta­ti­on Regu­la­ti­on). It con­ta­ins the customer’s name and address, the quan­ti­ty and type of goods, the place and month of receipt, the date of issue and the customer’s signa­tu­re, which may be omit­ted in the case of elec­tro­nic trans­mis­si­on. A coll­ec­ti­ve con­fir­ma­ti­on cove­ring a quar­ter is permitted.

The invoice must also include a refe­rence to the tax-exempt intra-Com­mu­ni­ty sup­p­ly and the VAT regis­tra­ti­on num­bers of both par­ties (Sec­tion 14a(3) of the Ger­man Value Added Tax Act (UStG)).

Coll­ec­tion is par­ti­cu­lar­ly pro­ne to errors. If the Danish cus­to­mer coll­ects the goods them­sel­ves in Flens­burg, the sup­pli­er does not have their own con­sign­ment note. The signed con­fir­ma­ti­on of arri­val is then often the only pro­of that the goods have crossed the bor­der. It should the­r­e­fo­re be signed at the time of coll­ec­tion. The result is 19 per cent VAT, which the sup­pli­er can hard­ly char­ge the cus­to­mer retrospectively.

Services for Danish companies

In the case of ser­vices pro­vi­ded to Danish com­pa­nies, the place of sup­p­ly is gene­ral­ly in Den­mark, at the customer’s regis­tered office (Sec­tion 3a(2) of the Ger­man Value Added Tax Act). The cus­to­mer is lia­ble for Danish VAT under the rever­se-char­ge mecha­nism. The Ger­man invoice is issued wit­hout VAT and must include the state­ment „VAT lia­bi­li­ty lies with the reci­pi­ent of the ser­vice“ as well as the VAT regis­tra­ti­on num­bers of both par­ties. It must be issued by the 15th of the fol­lo­wing month (Sec­tion 14a(1) of the Ger­man VAT Act). The­se sup­pli­es must also be included in the reca­pi­tu­la­ti­ve statement.

This appli­es, for exam­p­le, to con­sul­tancy, plan­ning, soft­ware deve­lo­p­ment, adver­ti­sing and the repair of mova­ble pro­per­ty. Excep­ti­ons app­ly, among­st other things, to ser­vices rela­ting to land, pas­sen­ger trans­port and admis­si­on tickets to events.

Craftsmanship and installation in Denmark

Ser­vices rela­ting to a plot of land are dee­med to be sup­pli­ed at the loca­ti­on of that plot (Sec­tion 3a(3)(1) of the Ger­man Value Added Tax Act (UStG)). This appli­es to con­s­truc­tion work, instal­la­ti­ons, repairs to buil­dings and valua­tions of plots of land. If the busi­ness sup­pli­es the mate­ri­als and installs them per­ma­nent­ly, this con­sti­tu­tes a ‘sup­p­ly of work and mate­ri­als’ for VAT pur­po­ses, which is also car­ri­ed out at the instal­la­ti­on site in Den­mark. Read more about the distinc­tion in our artic­le Sup­p­ly of works or per­for­mance of works.

The key fac­tor, then, is who you are working for:

  • A Danish com­pa­ny as a cli­ent: Under Danish law, the Danish cus­to­mer is gene­ral­ly lia­ble for VAT when a trader not estab­lished in Den­mark pro­vi­des con­s­truc­tion ser­vices or sup­pli­es and installs goods. In this case, the Ger­man com­pa­ny is not requi­red to regis­ter in Den­mark. Howe­ver, the Danish tax aut­ho­ri­ties high­light an important excep­ti­on: if the Ger­man main con­trac­tor, in turn, enga­ges Ger­man sub­con­trac­tors, they may beco­me lia­ble to regis­ter in Denmark.
  • Pri­va­te cus­to­mer in Den­mark: The­re is no rever­se-char­ge pro­ce­du­re in this case. The busi­ness must char­ge and pay Danish VAT at 25 per cent. For con­tracts for work and mate­ri­als, regis­tra­ti­on in Den­mark is usual­ly requi­red for this pur­po­se, and an appli­ca­ti­on should be sub­mit­ted at least eight days befo­re work com­men­ces. In the case of pure ser­vices wit­hout the sup­p­ly of mate­ri­als, such as a repair, Danish VAT can ins­tead be declared via the OSS pro­ce­du­re with the Fede­ral Cen­tral Tax Office (Sec­tion 18j of the Ger­man VAT Act (UStG)). Which pro­ce­du­re appli­es the­r­e­fo­re depends on whe­ther the tran­sac­tion invol­ves the sup­p­ly of goods and ser­vices or a ser­vice alone.

The­re is no sum­ma­ry decla­ra­ti­on for pro­per­ty-rela­ted ser­vices. Howe­ver, the­re are addi­tio­nal obli­ga­ti­ons in Den­mark in this regard.

The RUT Register

Anyo­ne who tem­po­r­a­ri­ly sends employees to Den­mark to pro­vi­de a ser­vice must regis­ter with the Danish „Regis­ter for uden­lands­ke tje­nes­tey­de­re“ (RUT). For self-employ­ed per­sons wit­hout employees, this requi­re­ment appli­es in cer­tain sec­tors, par­ti­cu­lar­ly in con­s­truc­tion and in the instal­la­ti­on and repair of machi­nery. Regis­tra­ti­on must take place no later than the start of work; any chan­ges must be repor­ted by the next working day. Late regis­tra­ti­on may result in a fine of 10,000 Danish kro­ner, appro­xi­m­ate­ly 1,340 euros.

Danish cli­ents in the con­s­truc­tion, agri­cul­tu­re, hor­ti­cul­tu­re and clea­ning sec­tors are obli­ged to ask to see pro­of of a RUT num­ber. If this is not pro­vi­ded, they must inform the Danish Working Envi­ron­ment Aut­ho­ri­ty. Den­mark has tigh­ten­ed its checks in recent years. From 1 Janu­ary 2026, a copy of the ser­vice con­tract must also be uploa­ded to the RUT sys­tem when regis­tering. A Ger­man com­pa­ny wit­hout a RUT num­ber will the­r­e­fo­re quick­ly beco­me a pro­blem for its cli­ent on Danish con­s­truc­tion sites.

When does a permanent establishment in Denmark come into being?

As long as a Ger­man com­pa­ny does not have a per­ma­nent estab­lish­ment in Den­mark, it pays tax in Ger­ma­ny on its pro­fits from its busi­ness in Den­mark. For con­s­truc­tion sites and instal­la­ti­on pro­jects, the dou­ble taxa­ti­on agree­ment sets a clear thres­hold: a con­s­truc­tion or instal­la­ti­on pro­ject is only dee­med to con­sti­tu­te a per­ma­nent estab­lish­ment if its dura­ti­on exceeds twel­ve months (Artic­le 5(3) of the Dou­ble Taxa­ti­on Agree­ment with Den­mark). Irre­spec­ti­ve of this, a fixed place of busi­ness in Den­mark, such as an office or a work­shop, may con­sti­tu­te a per­ma­nent estab­lish­ment. A mere warehouse or dis­tri­bu­ti­on cent­re is not suf­fi­ci­ent for this pur­po­se (Artic­le 5(4) of the Den­mark Dou­ble Taxa­ti­on Agreement).

If a per­ma­nent estab­lish­ment ari­ses, Den­mark may tax the pro­fits attri­bu­ta­ble to it. Ger­ma­ny exempts the­se pro­fits (Artic­le 24 of the Den­mark Dou­ble Taxa­ti­on Agree­ment). Howe­ver, in the case of sole trad­ers and part­ners in part­ner­ships, the­se pro­fits increase the tax rate on their other inco­me (pro­gres­si­on clau­se). In Den­mark, this then gives rise to spe­ci­fic tax return and accoun­ting obligations.

For lar­ge pro­jects, it is worth bea­ring the twel­ve-month limit in mind right from the start. Delays, tem­po­ra­ry inter­rup­ti­ons and rework are gene­ral­ly included in this. The start and end dates of on-site work should the­r­e­fo­re be cle­ar­ly documented.

Deploying staff in Denmark

Payroll tax

If employees of a Ger­man com­pa­ny work tem­po­r­a­ri­ly in Den­mark, their wages remain taxa­ble in Ger­ma­ny under the dou­ble taxa­ti­on agree­ment pro­vi­ded that all three of the fol­lo­wing con­di­ti­ons are met (Artic­le 15(2) of the Dou­ble Taxa­ti­on Agree­ment with Den­mark): The employee works in Den­mark for no more than 183 days in the calen­dar year, the employ­er is not resi­dent in Den­mark, and the wages are not paid by a Danish per­ma­nent estab­lish­ment. It is the working days in Den­mark that are coun­ted, not the days spent there.

A par­ti­cu­lar fea­ture of Danish law may throw a span­ner in the works. If staff work on an hour­ly basis and under the ins­truc­tions of the Danish cli­ent, as if they were part of that client’s busi­ness, Den­mark tre­ats this as the sup­p­ly of labour („arbejd­sud­le­je“). The wages are then taxa­ble in Den­mark from the very first day, with a flat-rate tax of around 35 per cent. The 183-day rule under the agree­ment does not app­ly to com­mer­cial labour hire eit­her (Art. 15(4) of the Den­mark Dou­ble Taxa­ti­on Agree­ment). Ger­ma­ny then cre­dits the Danish tax. Howe­ver, Den­mark inter­prets the con­cept of tem­po­ra­ry agen­cy work more broad­ly than Ger­ma­ny. If the Ger­man tax aut­ho­ri­ties do not con­sider it to be tem­po­ra­ry agen­cy work, both count­ries will tax the wages, and the­re is a risk of dou­ble taxa­ti­on. A fixed-pri­ce con­tract for work and ser­vices, with the Ger­man com­pa­ny pro­vi­ding its own site manage­ment and retai­ning the right to issue ins­truc­tions, keeps this risk to a minimum.

Social security

EU rules app­ly to social secu­ri­ty. In the case of a pos­ting las­ting up to 24 months, employees remain cover­ed by the Ger­man social secu­ri­ty sys­tem (Artic­le 12 of Regu­la­ti­on (EC) No 883/2004). The A1 cer­ti­fi­ca­te ser­ves as pro­of of this and should be appli­ed for even for short-term assignments.

Working conditions

Den­mark does not have a sta­tu­to­ry mini­mum wage. Wages and working con­di­ti­ons are regu­la­ted by coll­ec­ti­ve agree­ments. We explain which Danish working con­di­ti­ons app­ly to pos­ted workers and what should be included in an employ­ment con­tract for assign­ments abroad in the Employ­ment law.

Cross-border commuters within our own workforce

Many busi­nesses in the regi­on employ staff who live in Den­mark and work in Ger­ma­ny. Their wages are gene­ral­ly taxed in Ger­ma­ny (Artic­le 15(1) of the Den­mark-Ger­ma­ny Dou­ble Taxa­ti­on Agree­ment); the agree­ment does not con­tain any spe­ci­fic pro­vi­si­ons for cross-bor­der com­mut­ers. If such employees work part­ly from home in Den­mark, the juris­dic­tion for tax and social secu­ri­ty con­tri­bu­ti­ons may chan­ge. This should be che­cked befo­re any home-working arran­ge­ment is agreed.

Contracts with Danish customers

Which law applies?

In the case of sales con­tracts bet­ween busi­nesses, the UN Con­ven­ti­on on Con­tracts for the Inter­na­tio­nal Sale of Goods (CISG) auto­ma­ti­cal­ly appli­es bet­ween Ger­ma­ny and Den­mark unless the par­ties exclude its appli­ca­ti­on. This also appli­es to con­tracts for goods that have yet to be manu­fac­tu­red. Sin­ce 2013, it has also appli­ed to the con­clu­si­on of con­tracts, fol­lo­wing Denmark’s with­dra­wal of its pre­vious reser­va­ti­on. The UN Con­ven­ti­on on Con­tracts for the Inter­na­tio­nal Sale of Goods dif­fers from Ger­man sales law in key respects, such as noti­ce peri­ods for defects and com­pen­sa­ti­on for damages.

Den­mark does not app­ly the Euro­pean Rome I Regu­la­ti­on on the law appli­ca­ble to con­tracts, but rather the ear­lier Rome Con­ven­ti­on of 1980. Both allow for a free choice of law. We the­r­e­fo­re recom­mend that con­tracts and terms and con­di­ti­ons express­ly spe­ci­fy which law appli­es, whe­ther the UN Con­ven­ti­on on Con­tracts for the Inter­na­tio­nal Sale of Goods is excluded, and which court has jurisdiction.

Enforcing claims in Denmark

The Euro­pean Regu­la­ti­on on Juris­dic­tion and Enforce­ment (Brussels Ia) also appli­es to Den­mark by vir­tue of a 2005 agree­ment. A Ger­man judgment or enforce­ment order can the­r­e­fo­re be enforced in Den­mark wit­hout the need for a Danish court to first decla­re it enforceable. The Danish dis­trict court has juris­dic­tion over enforcement.

Howe­ver, two Euro­pean instru­ments are not available: the Euro­pean Order for Pay­ment Pro­ce­du­re and the Euro­pean Small Claims Pro­ce­du­re do not app­ly to Denmark.

This makes a con­trac­tu­al agree­ment on the place of juris­dic­tion all the more important. Wit­hout such an agree­ment, under the Brussels Ia Regu­la­ti­on, the place of per­for­mance is decisi­ve along­side the customer’s regis­tered office: for the sup­p­ly of goods, this is the place to which the goods are deli­ver­ed; for the pro­vi­si­on of ser­vices, it is the place whe­re the ser­vices are per­for­med. Anyo­ne who deli­vers to Den­mark or car­ri­es out instal­la­ti­on work the­re will the­r­e­fo­re usual­ly have to bring a cla­im befo­re a Danish court if no agree­ment has been made. We descri­be how we enforce out­stan­ding claims against dome­stic and for­eign cus­to­mers on our page on Cre­dit manage­ment.

Legal and tax services under one roof

Busi­ness dealings with Den­mark invol­ve value added tax, inter­na­tio­nal tax law, employ­ment law and con­tract law. A mista­ke in one area often has knock-on effects in the others: an assem­bly con­tract on an hour­ly basis can shift pay­roll tax lia­bi­li­ty to Den­mark; a miss­ing pro­of of deli­very can result in the loss of tax exemp­ti­on; and a lack of a desi­gna­ted place of juris­dic­tion can make it dif­fi­cult to reco­ver the invoice.

Ina Ree­se is a soli­ci­tor, a spe­cia­list in tax law and a tax advi­ser. We pro­vi­de advice on Ger­man value added tax and dou­ble taxa­ti­on agree­ments as part of our Tax advice and in the Tax law, draft sup­p­ly and ser­vice con­tracts and gene­ral terms and con­di­ti­ons for busi­ness in Den­mark, and review employ­ment con­tracts for assign­ments abroad. A Danish advi­ser is requi­red for regis­tra­ti­ons and decla­ra­ti­ons in Den­mark. We liai­se with them on behalf of the Ger­man side, inclu­ding in English.

Frequently asked questions about doing business with Denmark

Do I need a Danish VAT number for deliveries to Denmark?

This is not usual­ly the case for goods sup­pli­ed to Danish com­pa­nies. The sup­p­ly is VAT-exempt in Ger­ma­ny; the cus­to­mer pays VAT on the purcha­se in Den­mark. You will need your Ger­man VAT num­ber, the customer’s Danish VAT num­ber and pro­of that the goods have arri­ved in Den­mark. Regis­tra­ti­on in Den­mark may be requi­red for instal­la­ti­on work for pri­va­te cus­to­mers or when using Ger­man subcontractors.

From what point do I have to pay tax on my profits in Denmark?

Only if you have a per­ma­nent estab­lish­ment the­re. In the case of con­s­truc­tion sites and instal­la­ti­on work, under the dou­ble taxa­ti­on agree­ment this is only the case if the indi­vi­du­al pro­ject lasts for more than twel­ve months. A per­ma­nent office or work­shop in Den­mark may con­sti­tu­te a per­ma­nent estab­lish­ment ear­lier than that, whe­re­as a warehouse on its own does not.

Do I need to register my fitters in Denmark?

As a gene­ral rule, yes. Anyo­ne pos­ting workers to Den­mark to pro­vi­de a ser­vice must regis­ter the assign­ment with the RUT regis­ter no later than the start of the assign­ment. Excep­ti­ons for very short assign­ments do not app­ly to con­s­truc­tion work. For social secu­ri­ty pur­po­ses, an A1 cer­ti­fi­ca­te should be available for each employee.

Which law applies in the event of a dispute with a Danish customer?

That depends on the con­tract. In the absence of any spe­ci­fic pro­vi­si­on, the UN Con­ven­ti­on on Con­tracts for the Inter­na­tio­nal Sale of Goods appli­es to sales con­tracts bet­ween busi­nesses. For all other mat­ters, the law appli­ca­ble is deter­mi­ned in accordance with the con­flict-of-laws rules, and a Danish court will often have juris­dic­tion. By express­ly choo­sing Ger­man law and desi­gna­ting a place of juris­dic­tion in Ger­ma­ny, you crea­te cla­ri­ty, and a Ger­man jud­ge­ment can be enforced in Denmark.

In summary

  • Deli­veries of goods to Danish com­pa­nies are VAT-exempt pro­vi­ded that the VAT regis­tra­ti­on num­ber, the reca­pi­tu­la­ti­ve state­ment and the pro­of of arri­val are correct.
  • Ser­vices pro­vi­ded to Danish com­pa­nies are invoi­ced wit­hout Ger­man VAT and with a rever­se-char­ge notice.
  • For instal­la­ti­on work car­ri­ed out for Danish com­pa­nies, the cus­to­mer is usual­ly lia­ble for Danish VAT; for pri­va­te cus­to­mers, regis­tra­ti­on in Den­mark is often required.
  • Anyo­ne pos­ting workers to Den­mark must regis­ter them in the RUT register.
  • A con­s­truc­tion site only beco­mes a Danish per­ma­nent estab­lish­ment after more than twel­ve months.
  • Work car­ri­ed out on an hour­ly basis under the ins­truc­tions of a Danish cli­ent may imme­dia­te­ly trig­ger Danish pay­roll tax.
  • A choice of law and juris­dic­tion clau­se should be included in every con­tract with Danish cus­to­mers, as other­wi­se Danish courts will often have juris­dic­tion and the Euro­pean order for pay­ment pro­ce­du­re will not be available.

Do you work in Den­mark on a regu­lar basis, or are you plan­ning to start working the­re? During an initi­al con­sul­ta­ti­on las­ting around 15 minu­tes, we will iden­ti­fy which issues need to be addres­sed first for your busi­ness. Get in touch now

Sources

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