Article:

Verification when reporting to the EC sales list concerning VAT

20 December 2018

Pernille Rise , Senior Manager, VAT |

The Danish tax authorities no longer provide a notification, if a company has used an invalid VAT number when reporting to the EC sales list. Companies must check for error messages and correct errors.

Danish companies selling goods or services to companies in other EU countries shall generally not charge VAT on sales, because they are subject to the rules on reverse charge. This means that the buyer is responsible for settling the VAT.

However, in order for the sale to be invoiced without VAT, it is a condition that the seller verifies the buyer's VAT number and reports both the sales and the VAT number to the EC sales list. This applies to the sale of both goods and services. The latter is overlooked by many. Verification of a foreign customer's VAT number must be done on a regular basis and at least quarterly.

The EC sales list is a verification system used by tax authorities within the EU to ensure proper VAT treatment of goods and services traded within the Union.

In Denmark, reporting must generally be made no later than the 25th of each month, and the report must be reconcilable with the amounts reported in Box B on the VAT return.

However, companies settling VAT either quarterly or half-yearly may be allowed to report quarterly to the EC sales list, if they only sell services to other EU countries, or if the value of sales does not exceed DKK 400,000 quarterly.

Previously, companies received a notification from the Danish tax authorities, if they had reported an invalid VAT number to the EC sales list. This is no longer the case.

However, companies need to check if they receive error messages from the system. It takes 14 days before the final check in the EU database has been completed. When this happens, a small triangle will appear in the "status", if there are errors in the reported VAT numbers. These should then be corrected.

Failure to verify the buyer's VAT number is, like the failure to report to the EC sales list, subject to penalty.

If a company's trade in goods - both purchases and sales - with other EU countries exceeds certain thresholds, it will be required to report this trade to “Intrastat”, operated by Statistics Denmark, which describes Denmark's trade in goods - but not trade in services - with the other EU countries.

In 2018, the threshold values are set at 4.7 million DKK for EU exports and to 6.2 million DKK for EU imports. Typically, information submitted on the VAT return is used to identify the companies that are required to report, and Statistics Denmark gives notice to the companies that must report to “Intrastat”.

The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge. Please sign up here.