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EU Authorizes Danish Flat Rate VAT Scheme For Vehicles

by Ulrika Lomas, Tax-News.com, Brussels

28 March 2018


A Council Implementing Decision has been published in the Official Journal of the European Union extending a derogation from the EU VAT Directive with respect to the private use of business vehicles in Denmark.

Danish legislation provides that if a light goods vehicle with a maximum authorized total weight of three tonnes is registered with the Danish authorities as being used for business purposes only, the taxable person is allowed to deduct the full input VAT on the purchase and running costs of the vehicle. However, if such a vehicle is subsequently used for private purposes, the taxable person loses the right to deduct the VAT incurred on the purchase cost of the vehicle.

The derogation allows taxable persons who have registered a vehicle only for business purposes to use the vehicle for private purposes, and to calculate the taxable amount of the deemed supply of services pursuant to Article 75 of the VAT Directive on a daily flat-rate basis, rather than lose their right to deduct the VAT incurred on the purchase cost of the vehicle.

Under the simplified calculation method, use of a vehicle with a maximum authorized total weight of three tonnes for private purposes should be limited to 20 days per calendar year, with the flat-rate amount of VAT to be paid fixed at DKK40 (USD6.63) for each day of use for private purposes. According to the decision, this amount has been set by the Danish Government on the basis of an analysis of national statistics.

This measure aims to simplify the VAT obligations of taxable persons who make occasional use for private purposes of a vehicle that was registered only for business purposes.

It would remain possible for a taxable person to choose to register a light goods vehicle as being used for both business and private purposes. In doing so, the taxable person would lose the right to deduct the VAT incurred on the purchase cost of the vehicle but would not be required to pay a daily charge for any use for private purposes.

The authorization for the derogation is due to expire on December 31, 2020.

TAGS: VAT special schemes | tax | business | value added tax (VAT) | Denmark | legislation | European Union (EU) | services | Europe

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