Danish court issues VAT ruling for outsourcing
Thursday December 10, 2009
A new court ruling in Denmark means services provided to local firms from abroad could now be subject to VAT.
The Danish National Tax Tribunal ruled that data processing services provided to a Danish bank from the UK are liable to Danish VAT under the reverse change mechanism.
Initially, the services outsourced to the UK third party were deemed to be accounting and management services which are not subject to reverse charge VAT in Denmark.
Upon closer inspection however, the court stipulated that the services should be considered data and as a result, subject to reverse charge VAT.
The court concluded that the services provided by the UK firm did not qualify for any exemptions because they were not essential to the loan transactions the Danish bank was providing.
The outcome will have implications for other data outsourcing firms with business ties to Denmark.
Denmark recently launched a crackdown on VAT fraud relating to carbon credits traded through the EU emissions trading scheme.
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