The Danish Government has widen the Tax Authorities’ information collection powers, by enabling it to be able to request payment information in connection with foreign suppliers who supply goods via distance selling, on-line e-commerce or supply electronic services to private individuals in Denmark. The law was accepted by parliament the 21 December 2015 and is in force as of 1 January 2016.
The intention behind the law is to protect the Danish VAT revenue and to ensure that Danish companies are able to compete on pricing with their foreign counterparts and to minimise VAT leakage.
In order to ensure that a more systematic approach is applied to the Tax Authorities’ inquiries. The new law authorises the Tax Authorities to request information from providers of payment solutions (e.g. credit card companies, banks etc). The information requested from the payment service provider includes the total amount received by the foreign supplier in relation to the goods or electronic services supplied to private individuals in Denmark. The information received will help the Tax Authorities determining whether the foreign supplier has exceeded the distance selling threshold for example such that they should be registered for VAT in Denmark or whether a registration obligation exists because of providing B2C e-services. The Danish Tax Authorities have just announced that they are going to prioritise resources on minimising the VAT-gap.
What does it mean for you?
- Suppliers engaged in distance selling and supplying electronic services to Danish private customers, who are not currently VAT registered, should review their VAT position closely.
- Non-established suppliers of e-services should consider registering for VAT as soon as possible and should determine whether a voluntary disclosure be made regarding historic periods.
The question arises how can the Danish tax authorities enforce the registration of non-estbalished suppliers. With respect to e-commerce it is relatively easy by blocking the delivery of parcels, which will lead to unsatisfied customers. For providing e-services it may also be possible to block websites and making them unavailable from Denmark. You can also be exposed to publication of your company name as non-compliant corporation causing reputational risk to your brand.