The self-employed are exempt from paying B-tax in April and May. Employers are exempt from paying in A-tax for three months. And both large and small companies get extended VAT credit. Some more than others.
As an attempt at providing companies with a liquidity buffer to mitigate the financial consequences of the coronavirus, the Danish Parliament has decided to extend certain payment deadlines for tax and VAT and to raise the ceiling for tax account deposits.
Withheld labour market contributions and A-tax
For salaries paid in March 2020, withheld A-tax and labour market contributions are to be paid as per usual. For large companies, this means by 31 March 2020 and for small and medium-sized companies, it means by 10 April 2020. In this context, large companies are defined as companies which on a 12-month basis withhold in excess of DKK 1 million in A-tax or DKK 250,000 in labour market contributions.
For the subsequent three months – i.e. for salaries paid out in April, May and June – the payment deadline is extended by four months in accordance with the table below. Only the deadline for payment of the withheld sums is extended. The deadline for reporting the figures is not extended.
The payment deadline extension – which does not apply to public-sector employers – means that May, June and July will be payment-deferred for small and medium-sized companies while for the large companies this will apply to April, May and June.
On the other hand, withheld A-tax and labour market contributions for the three months will have to be paid together with the sums withheld for salary payments for August, September and October. The immediate liquidity easing will therefore be countered by an equal liquidity requirement increase in those months.
The deadline for both reporting and paying VAT is extended, but only for companies that want this. Companies with negative VAT (e.g., exporting and certain construction companies) will therefore still be able to receive excess sums not later than three weeks after reporting their VAT liability.
The deadline extension is not equally long for all companies, but depends on whether the company normally settles VAT on a monthly basis (large companies), on a quarterly basis (medium-sized companies) or on a semi-annual basis (small companies), as the smaller companies are afforded longer credit than the large companies.
Companies with annual VAT turnover in excess of DKK 50 million settle VAT on a monthly basis and must normally make payment before the 25th of the following month. This deadline is extended with immediate effect by 30 days, but only in respect of sales in March, April and May in accordance with this table:
The extension means that April will be payment-deferred. Conversely, VAT will be payable in July which is normally not a payment month. In August, VAT will be payable as normal on both the 17th (for June) and on the 25th (for July).
For companies with an annual turnover between DKK 5 and 50 million, the deadline for payment of VAT is extended for Q1 2020 from 2 June 2020 to 1 September 2020. By three months, in other words. The new payment deadline is identical to the deadline for paying VAT for Q2 2020. In practical terms, this forms a combination of the VAT period for Q1 and Q2.
For companies with turnover below DKK 5 million, the VAT period for H1 and H2 2020 are combined, meaning that VAT for H1 is not due for payment on 1 September 2020, but not until 1 March 2021, at which time the VAT for H2 2020 already has to be paid. An extension of six months.
B-tax instalments for self-employed persons
The payment deadline for B-tax instalments payable by self-employed persons on 20 April and 20 May 2020 have been extended to 20 June and 20 December respectively. An extension of one and seven months respectively. The difference is due to the payment deadlines having been moved to those two months of the year (June and December) which otherwise normally do not include payments of B-tax instalments. There will therefore be no months with double instalments as the non-payment months are simply moved forward.
The payment deadline extension does not affect the size of instalments. For many self-employed persons, it will therefore be more relevant to consider changing their tax assessment if they expect to see a significantly lower income than the basis for calculating the current B-tax instalments. Changing the assessment will therefore have the potential to eliminate remaining B-tax instalments completely or partially and thereby render the payment deadline extension of no consequence.
If 2020 ends with a neutral result or a loss, any B-tax instalments already paid will, as a general rule, only be refunded when the final tax certificate for 2020 is to hand. It is possible, however, to request an advance payment from the Danish Tax Agency if it can be documented that the B-tax instalments already paid will exceed the final tax liability.
Tax on account for companies
The first instalment of the year’s tax on account for companies must be paid not later than 20 March 2020. If a company expects income for 2020 to be significantly less than was presumed as the basis for calculating the tax on account, the company can independently reduce the payment via the TastSelv system. It is not required to apply for permission to do this from the Danish Tax Agency.
Higher tax account ceiling
Not all companies experience liquidity pressure. The extension of deadlines for payment of tax and VAT can therefore cause financial disadvantage in the form of negative bank interest for companies that want to pay earlier.
In consideration of these companies, the limit for the size of deposits in the company’s tax account has been increased from DKK 200,000 to DKK 10 million. The new limit – which must be actively selected – only applies until the end of November 2020.