VAT deductions for fixed costs
You may deduct VAT from expenses incurred on a regular basis by your business subject to VAT (fixed costs). The deduction is made by declaring it as input VAT in your VAT return.
If your expenses concern revenue subject to VAT generated by your business, the VAT is fully deductible. This applies to expenses for:
- rent (if VAT has been added to the invoice)
- purchase of and expenses for repair and maintenance of operating equipment, e.g. machinery, tools, fittings and furniture in factory, shop or office, fishing vessels
- workwear and uniforms belonging to the business and which the staff wear at work
- mobile phones if the phone can be regarded as operating equipment in relation to the business’s sale of goods and services subject to VAT
- magazines, trade journals, technical literature, staff and customer magazines, including periodicals. Weekly magazines and periodicals provided by the business as part of its customer service
- flowers for decorating restaurants and hair salons, among other things
- heating, electricity, gas and water for the business
- advertising items and printed advertising material
- cleaning
- safety equipment
- telephone (landline)
- office supplies
- accounting services
Special rules
Special rules apply to car expenses.
Special rules also apply if the expenses relate to acquisition or renovation of real property, and in relation to purchases of for example machines and other operating fixture and equipment (assets) of more than DKK 100,000.
Check if a business is registered for VAT or has employees
You can check the businesses you work with to see if they are registered for VAT or if they are registered as employers. If they are not registered, you may risk losing your deduction.
Check if a business is registered for VAT in Denmark (in Danish)
Check if a business is registered as an employer and has employees (in Danish)
If you work with non-Danish businesses, you may also check if they are registered for VAT in their home countries. There may be certain requirements for non-Danish business to be registered in RUT (Register of non-Danish service providers).
If you have both revenue that is subject to VAT and revenue that is exempt from VAT, you must distribute the VAT on the expenses which concern both revenue subject to VAT and revenue exempt from VAT (partial deduction). These may be expenses relating to rent, lighting, water, heating or accounting services.
How to calculate the partial deduction rate
The deduction rate to be calculated by you indicates the amount of VAT you may deduct from your rent, for example.
You will need the sales figures from the preceding financial year when calculating input VAT for a VAT period. When the financial year has ended, you must adjust the deduction claimed during the year to make sure there is agreement between your final VAT deduction and the relationship between the year’s sales subject to VAT and total sales.
| Sales and calculation | Amount/deduction rate |
|---|---|
| Total sale of goods and services | DKK 300,000 |
| Sale of goods and services subject to VAT | DKK 100,000 |
| Sale of goods and services exempt from VAT | DKK 200,000 |
| Calculation of deduction rate: (100,000/300,000) x 100= 33.3% Deduction rate is rounded up |
34% |
The total sales are the sales subject to VAT and the sales exempt from VAT. VAT should not be included in the sales subject to VAT.
If you purchase goods you also use for private purposes, for example a computer, you must estimate the extent to which the goods are used for private purposes and business purposes, respectively. The Danish Tax Agency (Skattestyrelsen) will normally accept your estimate, but it is important that you can explain how you have arrived at the distinction between private and business use.
If you have an asset (for example a printer) which you use for activities subject to VAT and activities exempt from VAT in the business and for private purposes, you must first estimate its use for private purposes. You must then distribute the remaining amount based on your business revenue (as shown in the example of calculation of partial VAT deduction above).
Example:
You purchase various computer equipment, which you also intend to use for private purposes. You estimate that the private share of the use of the equipment is 25%, while the computer is used in your business the rest of the time (activities subject to VAT and activities exempt from VAT).
| Sales and calculations | Amount |
|---|---|
| Purchase of computer with miscellaneous equipment | DKK 20,000 |
| VAT rate 25%: 20,000 x 0.25 | DKK 5,000 |
| Total price | DKK 25,000 |
When calculating the amount of deductible VAT, you must first deduct the private share.
Calculating the deductible VAT
| VAT and calculation of private share | Amount |
|---|---|
| Total VAT amount | DKK 5,000 |
| Private share 25%: 5,000 x 0.25 | DKK 1,250 |
| The remaining VAT amount to be distributed between the business’s share subject to VAT and exempt from VAT: 5,000 - 1,250 |
DKK 3,750 |
| The share subject to VAT is 34% (from previous example above): 3,750 x 0.34 |
DKK 1,275 |
In this example, the deductible VAT amount is DKK 1,275.
Businesses registered for VAT may deduct 100% of the VAT on hotel expenses and 25% of the VAT on restaurant expenses.
The hotel invoice must clearly state the price of the room and the restaurant service (for example breakfast).
VAT may only be deducted if the expenses relate to business activities subject to VAT and if the expenses are strictly business-related. This means that hotel accommodation and restaurant expenses of a partially private nature are not deductible.
Restaurant expenses
You may deduct 25% of the VAT on restaurant expenses incurred by the business for travelling salesmen in connection with their travel activities. You may also deduct 25% of the VAT on restaurant expenses incurred by the business as a result of its attendance at congresses, conferences, etc.
The deduction right comprises expenses incurred by the business for both its employees, its owner and any business associates.
If the business holds meetings for its own employees at an external venue, the same rules apply to deductions as described above.
The business may deduct VAT on meals (for example coffee and cake or lunch) in connection with meetings if the meetings are strictly business-related.
This may, for example, be in connection with:
- meetings with business associates
- board meetings
- in-house meetings with a professional content, including theme days
- in-house course activities
Specific, unannounced overtime
As a general rule, you are not entitled to VAT deductions for expenses relating to staff meals etc. However, you may deduct VAT in case of specific, unannounced overtime.
Specific and unannounced means that the work may not be planned in advance, nor may it be customary for the employee to work overtime. For example, no deduction will be granted for farm workers’ overtime during the harvesting season as this is regarded as normal overtime. A deduction will therefore only be granted for overtime which is announced immediately before the end of the normal working hours.
Social events
Expenses incurred by the business in connection with social staff events are not deductible. This applies, for example, to Christmas parties, staff parties, anniversary events and similar events.
For further legal information in Danish see our legal guide .