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A number of Danish VAT initiatives have been presented during the past year. Taxand Denmark considers two initiatives and the consequences for multinational businesses.
Reverse charge VAT on consumer electronics
The bill entered into force 1 July 2014 and covers domestic B2B supplies of mobile phones, gaming consoles, tablet PC’s, laptops, and integrated circuit devices. Danish customers will be liable for calculating and reporting the VAT due when purchasing any of these goods in Denmark.
The new rules have been introduced to reduce Missing Trader Intra-Community fraud where domestic transactions taxable for VAT are combined with EU cross border transactionsnot subject to VAT. Danish businesses purchasing consumer electronics in Denmark are obliged to check if the seller has accounted for VAT on supplies since buyers cannot deduct VAT incorrectly charged.
Changes to the place of supply for e-services
Currently, services supplied within the EU to end consumers and non-business customers are taxed in the member state where the suppliers are established. Suppliers established in member states with low VAT rates are favoured when delivering e-services across borders. To level out the suppliers’ competitive positions e-services will be taxable in the member state where the customers are located.
The changed place of supply will strengthen the position of Danish suppliers as the use of the consumers’ location will ensure an equal basis for the VAT payment. However, suppliers located in member states with lower VAT rates will be deprived of their advantageous position.
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Multinationals who are suppliers or purchasers of any of the products or services discussed above need to check whether the products or services they work with are applicable to the new rules as there is no exhaustive list provided by the Danish authorities.