What is output VAT (sales VAT)?
In Denmark, we have a tax supplement called VAT, which stands for Value Added Tax. Two concepts within VAT refer to when the tax is imposed and paid: input VAT and output VAT.
Output VAT is a VAT associated with a company’s taxable sales. The VAT is added to goods or services when a company sells to a private person or company.
You can manage your company's purchases and sales digitally with Acubiz
With Acubiz, you can manage your company’s purchases and sales, giving you an accessible overview when you must report VAT to Skattestyrelsen (tax authorities).
Output VAT is also called sales tax. This is because it is the VAT that the seller charges the buyer and later settles with the tax authorities. This means that the seller ultimately pays the sales tax.
How much is the sales tax?
In Denmark, the VAT rate is 25% on most goods.
The seller’s responsible for adding VAT to the goods or services sold so it is included in the price the customer pays.
For example, if a company sells a television for 4,000 kroner, 1,000 kroner must be added in VAT. The customer must therefore pay a total of 5,000 kroner.
When the company later reports to the tax authorities, the 1,000 kroner for the sale of the television in the above example is documented.
Your output VAT must be reported to the tax authorities
When you need to settle VAT, you must include your input and output VAT in your VAT accounts and send it to the tax authorities. The difference between your input and output VAT is the VAT that must be reported and paid to the tax authorities.
If your output VAT exceeds your input VAT, you must pay the difference to the tax authorities. You will receive a refund if the input VAT exceeds the output VAT.
Your VAT accounts must clearly indicate which goods and services you have sold and which goods and services you have purchased. Therefore, it is a good idea to ensure with your bookkeeper or bookkeeping that you have all invoices and receipts in order before reporting your accounts.
Not all services are subject to sales tax
There are exceptions to services that are not subject to sales tax. Here is a list of examples of tax-free services:
- Medical practices and treatments in hospitals
- Education in schools and higher education institutions
- Charitable activities
- Personal transportation
The above are not subject to VAT registration and may instead be subject to payroll tax, which amounts to a smaller amount as the total sum of salaries in the company.
Do you want to know more?
If you are VAT registered, you can get foreign VAT refunded from expenses and travel expenses. With Acubiz, you can skip the lengthy application process – we’ll do it for you.
Contact us if you want to know how we can help your business or book a free online demo to learn more.