Danish Cross-Border Business: EU Trade, Transfer Pricing and International Tax

June 16, 2026
🏷️ cross-border 🏷️ eu-trade 🏷️ transfer-pricing 🏷️ denmark 🏷️ vat 🏷️ moms 🏷️ reverse-charge 🏷️ double-taxation 🏷️ holding-company 🏷️ cfc-rules 🏷️ international-tax 🏷️ permanent-establishment

Denmark’s open economy and strategic location make it a natural hub for cross-border trade. But selling to or buying from businesses abroad brings a layer of tax complexity that domestic-only operations avoid. This guide covers EU trade VAT, transfer pricing, double taxation, holding structures, and the rules that keep your international business compliant.

EU Trade: Intra-Community Supply

When a Danish business sells goods or services to a business in another EU country, the transaction is generally treated as an intra-community supply — meaning it is VAT-free in Denmark.

Requirements for VAT-Free Intra-Community Supply

To qualify, all of the following must be true:

  1. The customer is a registered business (not a private consumer)
  2. The customer has a valid VAT number in their EU country
  3. The goods physically leave Denmark and arrive in another EU country
  4. You validate the customer’s VAT number via the VIES system (VAT Information Exchange System)
  5. The invoice includes both your Danish VAT number and the customer’s foreign VAT number
  6. The invoice includes the notation “reverse charge” or “omvendt betalingspligt”

Validating VAT Numbers via VIES

Before issuing a VAT-free invoice, you must verify your customer’s VAT number through the European Commission’s VIES portal. A valid VIES check protects you — if the customer’s number turns out to be invalid, you could be held liable for the Danish VAT.

Keep a printout or PDF of each VIES validation. SKAT may request this documentation during an audit.

Invoice Requirements

Your invoice for intra-community supplies must include:

EU Acquisitions: Buying from EU Businesses

When you purchase goods from an EU supplier, the reverse charge works in your favour — but you still have reporting obligations.

How It Works

In practice, this is a net-zero transaction for VAT purposes, but the reporting is mandatory.

EU VAT Return Reporting

You must report all intra-community acquisitions and supplies in the EU VAT return (also called the EC Sales List or ESL). This is filed monthly or quarterly along with your regular VAT return.

The report includes:

Failure to file or filing inaccurate data can result in penalties and may jeopardise your right to use the reverse charge mechanism.

Non-EU Trade

Exports to Non-EU Countries

Exports outside the EU are VAT-free (0% rate). But you must have proof of export to support the zero-rating.

Proof of export typically includes:

Keep all export documentation for 5 years. SKAT can audit your export transactions and disallow the zero-rating if you cannot prove the goods left the EU.

Imports from Non-EU Countries

When importing goods into Denmark from outside the EU, you must pay:

  1. Customs duty — varies by product type and country of origin
  2. Danish VAT (25%) — charged on the customs value plus duty and shipping costs

You can deduct the import VAT as input VAT on your next VAT return if the goods are used for business purposes.

Transfer Pricing

If your Danish company transacts with a related party — such as a parent company, subsidiary, or a company under common ownership — the pricing must be at arm’s length. This means the price must be the same as what two independent parties would agree in the open market.

When Documentation Is Required

You must prepare transfer pricing documentation if your company meets at least one of:

What the Documentation Must Include

Consequences of Non-Compliance

SKAT can adjust your income if your transfer pricing is not at arm’s length. This means they can increase your taxable income (and tax bill) to what they believe the price should have been, plus interest and potential penalties.

Tip: Prepare your transfer pricing documentation annually, before SKAT asks for it. Retrospective documentation is harder to defend.

Permanent Establishment (PE)

A permanent establishment (fast driftssted) is created when your Danish company has a fixed place of business or certain activities in another country. This triggers tax obligations in that country.

What Creates a PE

Consequences

If you create a PE abroad, you must:

  1. Register the PE with the local tax authority
  2. File a corporate tax return in that country
  3. Pay corporate tax on the profits attributable to the PE

The profits attributed to the PE are calculated separately from your Danish operations. Denmark’s double taxation agreements (DTAs) typically allocate taxing rights between the two countries to prevent double taxation.

Double Taxation Agreements (DTAs)

Denmark has signed double taxation agreements with over 70 countries. These treaties determine which country has the right to tax specific types of income — dividends, interest, royalties, and business profits.

How DTAs Work

DTAs generally follow the OECD Model Tax Convention. Key principles:

Checking DTA Rates

Before making cross-border payments, check the applicable DTA rates. For example:

Payment TypeCommon DTA Rate
Dividends15% (reduced from 27% domestic withholding)
Interest0% in many treaties
Royalties0–15% depending on country

You can find Denmark’s full list of DTAs on SKAT’s website or the OECD treaty database.

Holding Company Structure (Holdingselskab)

Many Danish businesses with international operations use a Danish holding company (Holdingselskab) to manage their investments. The main advantage is the participation exemption (fritagelsesmetoden).

Participation Exemption

Under the participation exemption, dividends and capital gains from qualifying subsidiaries are 100% tax-free in the holding company, provided:

  1. The holding company owns more than 10% of the subsidiary’s share capital
  2. The shares have been held for more than 1 year (continuously)
  3. The subsidiary is subject to a reasonable level of taxation in its country of residence

Benefits of a Holding Structure

Setting Up a Holding Company

To create a holding structure:

  1. Incorporate a new ApS or A/S (minimum share capital DKK 40,000 for ApS)
  2. Transfer your existing company’s shares to the holding company
  3. The holding company becomes the shareholder; you own the holding company

This is a common structure for Danish entrepreneurs and family businesses with international ambitions.

CFC Rules (Kontrollerede Udenlandske Selskaber)

Denmark’s CFC rules (Controlled Foreign Company rules) prevent Danish taxpayers from shifting profits to low-tax jurisdictions through foreign subsidiaries.

When CFC Rules Apply

The rules apply if a Danish company (or person) controls a foreign company that:

What Happens

If the CFC rules apply, the Danish taxpayer must include the foreign company’s passive income in their Danish taxable income, even if the profits have not been distributed.

Exceptions

Worked Example: Selling Goods to a German Company

A Danish company (ApS) sells DKK 1 million worth of goods to a German company.

Step-by-Step

  1. Validate the German customer’s VAT number via VIES — confirmed valid
  2. Issue an invoice for DKK 1,000,000 with:
    • No Danish VAT charged
    • Notation: “Reverse charge — omvendt betalingspligt”
    • Both VAT numbers displayed
  3. Record the sale in your books as an intra-community supply
  4. Report the sale in the EU VAT return (EC Sales List)
  5. The German customer pays German VAT (19%) to the German tax authority
  6. Danish VAT impact: None — the sale is VAT-free in Denmark
  7. Danish corporate tax: The DKK 1M revenue is included in your corporate taxable income (22% corporate tax applies)

Summary Table

ItemAmount
Sale priceDKK 1,000,000
Danish VAT chargedDKK 0
German VAT paid by customerEUR 247,000 (approx.)
Danish corporate tax on profit22% of taxable profit

Tips for Danish Cross-Border Businesses

  1. Get transfer pricing documentation prepared early. Do not wait for SKAT to request it. Arm’s length compliance is easier to demonstrate proactively.

  2. Always validate EU VAT numbers via VIES before issuing a VAT-free invoice. A single invalid number can cost you the full VAT amount in an audit.

  3. Keep proof of export for every non-EU shipment. Without customs documentation, SKAT can deny the zero-rating and charge you back VAT plus penalties.

  4. Consider a holding structure if you are building an international portfolio of subsidiaries. The participation exemption saves significant tax on dividends and exit gains.

  5. Monitor CFC rules if you have subsidiaries in low-tax jurisdictions. The rules are complex and the consequences of non-compliance are severe.

  6. Review your DTA position before making cross-border payments. Withholding tax rates vary significantly between countries, and treaty benefits often require formal applications.

  7. Register for a PE if you have employees or a fixed place of business abroad. Late registration leads to penalties and backdated tax liability in the foreign country.

  8. Work with a tax advisor who understands both Danish and international tax. Cross-border rules change frequently and the stakes are high.

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