Due to the continued lockdown of many businesses, the Danish parliament put forward a proposal today for a number of initiatives to strengthen the liquidity of the Danish business sector.

The proposal covers three elements:

  1. Postponement of payment deadlines for A-tax and social security contributions
  2. Extension of loan arrangement for the payment of A-tax
  3. New VAT loan arrangement for SMEs.

More about A-tax and social security contributions

As a result of the already deferred payment deadlines of A-tax and social security contributions, some businesses may be facing a need for liquidity to pay their A-tax and social security contributions when they are required to make double instalment payments for January, March and May 2021. For this reason, the Danish government has proposed an A-tax loan arrangement, under which small and medium-sized enterprises can apply for a refund of the A-tax and social security contributions due for payment in January 2021 in the form of an interest-free loan.

The A-tax loan arrangement is proposed extended to also include payments of A-tax and social security contributions for February and March. In addition, the arrangement shall include large businesses as well.

In addition, the ordinary payment deadline for A-tax and social security contributions in May 2021 will be postponed by 4.5 months for all businesses.

More about VAT

Businesses with an annual VAT taxable turnover of up to DKK 50 million must pay VAT on 1 March 2022.

For businesses with a turnover of up to DKK 5 million, it concerns the VAT payments for the first and second half of 2021, whereas for businesses with a turnover of DKK 5-50 million, it concerns VAT payments for the third and fourth quarter of 2021.

The government proposes to allow these businesses to loan the VAT amount initially payable on 1 March 2021 free of interest until 1 February 2022.

In relation to both the VAT and A-tax, the interest-free loan is conditional on the business not being in the course of winding-up, liquidation, compulsory dissolution or under reconstruction. In the event of other debt, the loan shall be used to offset these arrears.

Our comments

The proposal mitigates companies' immediate need for liquidity, but it does not change the fact that the vast majority of businesses will be facing a new challenge with their VAT and A-tax payments as well as social security contributions when the loan is to be repaid on 1 February 2022.

You can read more about the initiative on the Ministry of Taxation's website here.

Do you want to know more?

If you have any questions about the above, feel free to contact our experts:

Partner in Indirect Tax Flemming Lind

Director in Mobility & People Services Pernille Paisen

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