Michaela Merz

Denmark: VAT reverse – charge for IT goods from 1 July 2014

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From 1 July 2014 onwards, businesses involved in supplying certain IT hardware as well as mobile devices (e.g. mobile phones, game consoles, tablet computers, laptops,) in Denmark will no longer be obliged to charge Danish VAT on their invoices to other businesses.

Details and background of the new rule

The proposed new rules however still raise some questions. First of all, there is no exact list available yet for which products the rule applies, making delimitation very difficult. However, it is understood that it will be defined in accordance with the relevant provisions of EU´s VAT Directive. Moreover, the reverse-charge rule will not be applicable if a supplier sells more than 50% of his goods to non-entrepreneurs.

As a result, the supplier needs to carefully assess whether his supplies are covered by the new rule and monitor who his customers are. The customer, on the other hand, needs to react in case he has doubts that a supplier has correctly charged VAT on an invoice (for example because he knows or suspects that the supplier sells less than 50% to private individuals). Otherwise, in case of VAT unduly charged, the customer will not be able to recover the VAT incurred.

A further problem arises for previously unregistered buyers such as healthcare companies. They may be required to register for VAT purposes to account for VAT in respect of purchases of these type of products.

Recommendation

As businesses have time only until 1 July 2014 to adjust their ERP systems and their invoice templates to reflect these changes, we strongly recommend prioritizing this matter and making the required system configuration adjustments. Moreover, as a beneficiary of goods bought in Denmark you need to be aware of the customer structure of your supplier in order to know if you can deduct input VAT.

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