The main rule is that you can get a deduction for the VAT that is invoiced to your VAT-liable company in connection with your purchase.
Conversely, it also means that you cannot get a deduction for VAT if VAT is not stated on the purchase voucher, as it is self-explanatory; there is no VAT to deduct.
Nevertheless, sometimes I find that companies deduct VAT on purchases where there is no VAT.
This happens automatically if the company's accounting program is set up automatically to calculate VAT, and therefore you as a company must be extra careful when you post the purchase.
A typical example of an invoice where there is no VAT is an expense for insurance.
What is the key to being able to deduct VAT?
The crucial thing is that you need to use the purchase in your VAT-liable business.
You cannot get a VAT deduction if you are not VAT registered. You can also not get a VAT deduction if the purchase is used privately.
There are some assets that are used partly in the company and partly privately. On such a purchase, you can only get a deduction for a proportionate share of the VAT. You therefore have to make an estimate of how much private and how much business asset is used.
For example, if you estimate that the asset is used 75% commercially, then you will be able to get a deduction for 75% of the VAT stated on the invoice.
As a starting point, it is the company itself that makes this estimate and several factors can come into play (for example: how much of the time the asset is used privately versus in the company).
In practice, SKAT generally recognizes a 50% VAT deduction on the costs of acquiring and consuming such mixed-use assets.
Example of a mixed used asset:
A business owner acquires an iPhone that he will use both in the business and privately. To make the calculation easy, we say that he acquires the phone for DKK 10,000 incl. VAT.
The VAT thus amounts to DKK 2,000.
The business owner has a webshop and he often uses the phone to talk to suppliers and other business partners when he is at work (37 hours a week).
But he also has private calls and then he has downloaded the app "DR Ramasjang" for his daughter so she can watch videos and play games while he is preparing dinner.
If you ask him, he will say that he uses the phone as much privately as he uses it in his company, which is consistent with the statement you can draw on his iPhone over time consumption.
Thus, he can get a 50% deduction for VAT on the purchase, which is DKK 1,000.
He can also get a deduction for 50% of the VAT on the telephone subscription which he regularly pays.
Requirement for invoice, receipt (cash receipt) or other documentation - as well as bookkeeping thereof
It is a requirement to obtain a deduction for the purchase that there is some documentation that you have bought something for your company.
Documentation can be a purchase invoice or a receipt that meets the requirements to be an invoice or receipt.
The requirements for an invoice are:
- Invoice date
- Consecutive invoice number
- Seller's CVR no.
- Seller's name and address
- Buyer's name and address
- The quantity and nature of the goods / services provided
- The delivery date, if it is not the same as the invoice date
- The price without VAT
- Current VAT rate (25% in Denmark)
- VAT amount
If the purchase is less than DKK 3,000, you can just use a simplified invoice. This can, for example, be a receipt, which must also meet requirements no. 1, 4, 6 and then the receipt must state the size of the VAT or the total price incl. VAT.
If you buy something from a private person, this person typically does not issue an invoice, and in such a case, the buyer can issue an invoice to himself - a so-called settlement document.
The requirements for the settlement document are the same as for an invoice and in addition there are the following requirements:
- It must say "Self-invoicing" (in Danish: “Selvfakturering”)
- Buyer's CVR no.
- The seller must approve the settlement document. It can, for example, be by signature.