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VAT scrutiny expected for e-service providers
Non-EU e-service providers should carefully consider if they are at risk of having paid insufficient Danish VAT for services supplied to Danish customers. Taxand Denmark highlights how, if this is the case, e-service providers should report to the Danish tax authorities in order to avoid penalties and maybe also late payment interest.
The Danish tax authorities have confirmed that Denmark misses significant revenues each year by not collecting VAT from foreign e-service providers. The Danish Internet Trade Association has complained to the Minister of Taxation that the failure to collect VAT distorts the competition on the Danish market. Consequently, the Minister of Taxation will now expand the Danish authorities’ possibilities for controlling foreign services providers in an attempt to collect VAT due on their services.
Non-EU e-service providers are required to collect and remit Danish VAT on their sales to Danish customers if the services are used and enjoyed in the EU which is usually the situation for online services. Failure to comply with this obligation can be met with a VAT claim potentially 10 years retroactively. Additionally, in matters of gross negligence, fines will be imposed in an amount equaling the VAT evaded.
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Danish tax authorities will increase their focus on collecting revenue from foreign e-service providers. In order to avoid penalties, it is highly advisable that particularly non-EU e-service providers carefully assess whether their past sales could give rise to a Danish VAT exposure and, if this is the situation, file the correct reporting to the Danish tax authorities.