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Many companies fail to report VAT correctly when trading across borders. Inforevision can help with this.

Trading abroad - VAT

As a general rule, any cross-border transaction of goods or services affects your company's VAT return, whether you're the buyer, seller, intermediary or middleman.  

In addition to the VAT challenges, you may also need to clarify customs issues when importing or exporting goods to and from countries outside the EU. Read more here

If you trade in goods subject to Danish excise duties or covered by the so-called harmonized goods within the EU, there may also be special rules and obligations regarding these product groups. Read more here

VAT rules within the EU are largely harmonized. This means that the same rules and principles for VAT apply in Denmark as in the other 27 EU countries.

Apart from the cash flow advantage of not physically charging VAT, there are generally no advantages or disadvantages associated with buying or selling goods and services across borders. One of the purposes of the harmonized VAT rules is to ensure VAT neutrality between countries. In short, this means that Danish companies must calculate, declare and pay 25% VAT regardless of where a product or service is purchased.

Outside the EU, local VAT rules can be very different, as we often experience with Norway, for example. Even though the rules within the EU are harmonized, there are still many special rules, exceptions and differentiated rates in each member state, which may require a little extra preparation or planning for upcoming activities abroad.     

Whether you as a Danish established company must charge Danish sales VAT on the invoice, can choose not to charge Danish sales VAT on the invoice or must charge local foreign sales VAT on the invoice via a foreign VAT registration depends on a number of specific and actual circumstances. Remember that as a seller, you are always liable for non-payment of sales VAT. You should therefore always check which rules, obligations and requirements, etc. apply to you when trading abroad.

When you, as a buyer, seller, broker or intermediary of goods and services, trade across borders, there are a number of specific issues that you should initially investigate and clarify, including 

  • Is it one goods transaction or one service transaction
  • If service, what is the specific service in question
  • Where to pay VAT (which country)
  • Who has to pay the VAT (buyer and/or seller)
  • Who is/should be registered for VAT (buyer and/or seller)
  • How to declare / report the purchase or sale

Please contact inforevision for further clarification of the VAT rules and conditions that apply to your company when trading abroad or with foreign customers in general.

VAT accounting - reporting cross-border purchases and sales

It's important to set up your bookkeeping and chart of accounts properly from the start so that VAT reporting is a formality at the end of each period and not a recurring battle with many adjustments, re-postings, etc. Experience shows that many companies fail to handle, calculate and report cross-border transactions correctly.

Businesses can prevent most errors and opportunities for error by setting up the statutory VAT accounts in the accounts. The accounts must show how much VAT the company must report and pay. As a minimum, the accounts must contain an account for sales VAT and purchase VAT.

If the company trades abroad, the accounts must also include the following VAT accounts:

  • VAT on purchases from abroad
  • VAT on purchases of services from abroad with reverse charge
  • Purchasing goods in other EU countries (VAT return box A - goods)
  • Purchases of services with reverse charge in other EU countries (VAT return box A - services)
  • Sales of goods to other EU countries (VAT return's two boxes B - goods)
  • Sales of reverse charge services in other EU countries (VAT return box B - services)
  • Exports to countries outside the EU etc. (VAT return box C

Ask us for advice and we can help you with the structure of the chart of accounts and the background to it. In addition, we can help you with all other questions related to foreign trade.

Collaborate across borders

When a company has cross-border goods transactions, customs issues can be of particular importance. There can be significant differences between countries' regulations, even within EU member states.

Through our membership of Moore Global, an international network of independent accounting firms, we have access to a wide range of specialists in most parts of the world should the need arise.

In addition, we collaborate with a number of leading law firms here in Denmark and participate in a wide range of networks.

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