Understanding the intricacies of the Danish tax system can be challenging for new entrepreneurs, especially for those from different tax backgrounds like Ukraine. A recent workshop hosted by the The European Ukrainian Hub provided valuable guidance on this subject. The workshop, led by Oksana Medetska, a tax expert with over 10 years of experience, covered essential aspects of the Danish tax system, focusing on the needs of Ukrainian entrepreneurs who are starting or planning to start their businesses in Denmark. Here are some key takeaways from the session.
1. Understanding Danish Business Entities:
Danish business entities differ significantly from Ukrainian ones, making it essential to grasp these differences early. In Denmark, businesses are generally classified into two types: personally owned businesses and companies that are legally separate from their owners. Personally owned businesses, such as Personlig Virksomhed and Enkeltmandsvirksomhed, make the owner personally liable for the company’s debts and obligations. In contrast, companies like ApS (Anpartsselskab), which are akin to limited liability companies, shield the owner from personal liability but require more formalities and a minimum capital of DKK 40,000.
2. The Importance of Proper Registration:
Registering your business correctly is crucial for avoiding future legal and financial complications. Oksana emphasized the importance of selecting the appropriate business structure based on the scale and nature of your business. For small-scale operations or hobby-based activities, a Personlig Virksomhed might suffice, but for more substantial ventures, an ApS is advisable due to its legal protections and the ability to separate personal finances from business liabilities.
3. Tax Compliance:
A key highlight of the workshop was understanding the Danish tax obligations for entrepreneurs. Oksana warned against the common mistake of trying to apply Ukrainian tax principles to the Danish system. In Denmark, income generated from business activities must be reported accurately, and the correct tax must be paid. Failure to comply with Danish tax regulations, particularly with VAT (moms) and business income tax (skat), can result in penalties and complications.
4. The Role of VAT (Moms):
VAT is an integral part of the Danish tax system, and understanding when and how to apply it is essential for entrepreneurs. If your business’s annual turnover exceeds DKK 50,000, VAT registration is mandatory. The standard VAT rate in Denmark is 25%, which must be added to the price of goods and services and reported to the tax authorities. Entrepreneurs must also understand how to claim VAT on business-related purchases to optimize their tax liabilities.
5. Navigating Annual Reporting and Accounting:
Annual reporting requirements in Denmark vary depending on the type of business entity. For example, ApS companies have stricter reporting obligations, including a full annual report, which must be submitted to the Danish Business Authority. Oksana recommended that entrepreneurs consider hiring a professional accountant or auditor to manage these tasks, especially if the business is growing. Proper financial management and compliance with deadlines are crucial for maintaining good standing with Danish tax authorities.
6. Practical Tips for New Entrepreneurs:
Towards the end of the workshop, Oksana offered practical advice for those starting their businesses in Denmark. She emphasized the importance of keeping personal and business finances separate, even for small-scale businesses. Entrepreneurs were encouraged to seek professional help when necessary and to regularly review and update their tax estimates on the Danish tax portal (skat.dk) to avoid unexpected liabilities.
This workshop provided a thorough introduction to the Danish tax system, highlighting both the opportunities and challenges for Ukrainian entrepreneurs. With the right knowledge and resources, navigating the Danish tax landscape can become a manageable and even rewarding task.
Text and photo: Iryna Bulai
