The Danish tax authorities have been granted the right to request that payment providers, such as credit card issuers, provide them with information related to the payments they process. This will apply to providers that issue cards to private customers and those cards were used to make payments made within the time period from 1st September 2017 to 31st December 2018.
The tax authorities will be allowed to use this data to identify online VAT fraud perpetrated by distance sellers and foreign providers of electronically-supplied services to Danish customers. This data will include credit card statements and additional information detailing the identity and location and turnover of foreign retailers. Hence the tax authorities will be able to identify non-VAT-registered online retailers that have breached the annual EUR 35,000 Danish distance selling threshold and consequently require them to register for Danish VAT and charge VAT on their local supplies.
This development pre-empts the EU Commission’s plans to enact legislation bringing in similar reporting requirements for payment service providers at the EU-wide level. Member States will be expected to transpose these provisions into national law by the end of 2021 and apply them from the start of 2022. It also follows the lead that several other Member States have taken.
Online companies currently involved in cross-border transactions into Denmark are strongly encouraged to check if their level of business activity in Denmark warrants getting VAT-registered and if they are applying the correct VAT treatment to their supplies to Danish customers. It would be prudent to do this ahead of possibly being contacted by the tax authorities because if a registration is required, penalties might be mitigated by bringing it to the authorities attention instead of them recognising it.
Contact our VAT experts now and find out how this change could affect your business.