VAT in 2026: From Compliance Requirement to Strategic Advantage

VAT compliance is becoming more digital and data-driven

Since 2022, the Danish Tax Agency has stepped up its post-audit VAT controls. By using digital screening and risk-based assessments, the authorities are increasingly able to identify material risks, unusual reporting patterns, and recurring errors.

Differences between accounting records, VAT returns, EC Sales Lists, and supporting documentation can now more easily trigger questions or lead to an audit. At the same time, tax authorities are placing greater emphasis on consistency between VAT reporting and tax filings/returns, making alignment across company reporting more important than ever.

As such, businesses should make sure they have:

• Clear ownership and documented VAT processes,

• Regular reconciliations between accounting data and VAT reporting,

• Correctly configured VAT codes and master data, and

• Readily available documentation for both domestic and cross-border transactions.

In practice, many VAT errors are caused by misunderstandings, limited awareness, or weak internal processes. Even relatively simple mistakes can result in reassessments, interest charges, and significant internal time spent on remediation

New digital requirements are approaching

VAT compliance is becoming more data-driven, and new requirements for e-invoicing and digital reporting are approaching. This increases demands on data quality, processes, and documentation, but also creates opportunities to reduce risk, improve cash flow, and streamline compliance.

EU’s ViDA reform, adopted in 2025, will introduce digital reporting requirements for cross-border B2B transactions from 1 July 2030.

In Denmark, new rules for digital bookkeeping systems are also under consideration, including automatic enrolment in e-invoice receipt unless businesses opt out.

Although Denmark has not yet introduced general real-time VAT reporting, the direction is clear. Businesses should already assess whether their data, VAT codes, and systems are ready to support more digital and automated reporting.

Cross-border transactions present specific VAT risks

Cross-border transactions require a high level of consistency between documentation and reporting. A single international transaction may give rise to invoicing, documentation, registration, and reporting obligations in multiple jurisdictions.

Where an EU sale is treated as zero-rated, the application of 0% VAT must generally be supported by a valid VAT number, accurate reporting, and sufficient commercial and transport documentation. If any of these elements are missing, Danish or foreign VAT may be assessed, together with interest and potentially penalties.

The financial exposure can be significant — particularly where the VAT cannot subsequently be recovered from the customer.

Businesses should therefore consider reviewing:

• The documentation supporting VAT-exempt EU sales,

• Consistency between invoices, accounting records, VAT returns, and EC Sales Lists,

• Local VAT registration and reporting obligations,

• Chain transactions, triangular arrangements, and cross-border stock movements, and

• The treatment of corrections and credit notes.

A focused review can help identify the most significant VAT-related risk areas and clarify which actions should be prioritized.

VAT can also improve processes and cash flow

Strong VAT governance is not only about avoiding errors and reducing risk. A structured review can also reveal opportunities to create value, for example through:

• Unclaimed input VAT deductions and foreign VAT recovery opportunities,

• Manual processes that can be simplified or automated,

• VAT codes and master data that repeatedly lead to errors and corrections,

• Invoicing and payment flows that affect cash flow, and

• Registration and reporting obligations that can be managed more efficiently.

The outcome may be fewer corrections, stronger internal controls, reduced administrative effort, and a direct financial benefit.

Used effectively, VAT can become a management tool that supports both risk mitigation and operational improvement.