Deduction for business expenses

Examples of deductions include:

• purchase of goods for resale,
• purchase of tools, equipment and machinery
• fees for accountants and lawyers
• expenses for telephone and Internet
• rent of business premises
• electricity and heating
• repair and maintenance of business premises
• insurance

You are not entitled to deduct private expenses - meaning items you buy through your business but only use for private purposes. If you buy something which is used for both business and private purposes, you can deduct the part you use for business purposes.

You are also entitled to deduct VAT on some of your business expenses.

Check if a business is registered for VAT or has employees

You can check the businesses you work with to see if they are registered for VAT or if they are registered as employers. If they are not registered, you may risk losing your deduction.

Check if a business is registered for VAT in Denmark (in Danish)

Check if a business is registered as an employer and has employees (in Danish)

If you work with non-Danish businesses, you may also check if they are registered for VAT in their home countries. There may be certain requirements for non-Danish business to be registered in RUT (Register of non-Danish service providers).

Check VAT numbers in the EU/EEA (ec.europa.eu)

Check to see if a non-Danish business is registered in RUT (virk.dk) and read about the rules (in Danish)

You deduct relevant expenses in your annual accounts. By doing this, your deductible expenses will be deducted from your net profit or loss for the year which you state on your tax return.

Read more about tax on own business.

Further information on bookkeeping and accounts.

Operating costs relate to the continuous operations of your business, such as rental of premises, minor assets and depreciation. You can deduct such costs in your financial statements.

Plant and equipment include machinery, cars and furniture and fittings which are part of your operating costs. You can deduct plant and equipment items in your financial statements as minor assets as long the cost is less than DKK 33,100 in 2024 (DKK 32,000 in 2023) and the item is bought the same year. If the cost exceeds DKK 33,100 in 2024 (32,000 in 2023), you have to depreciate the item by an annual amount.

The limit depends on whether you are registered for VAT or not. If you are registered for VAT, the acquisition price is excluding VAT. If you are not registered for VAT, the acquisition price is including VAT.

Example

If you are registered for VAT, you can buy a machine for DKK 33,100 excluding VAT in 2024 (DKK 41,375 including VAT).

If you are not registered for VAT, you can only buy a machine for DKK 26,480 excluding VAT in 2024 (DKK 33,100 including VAT).

Deduction for minor assets

You may deduct plant and equipment with a short life (maximum three years) and minor assets with an acquisition price of maximum DKK 33,100 entirely in the year of acquisition in 2024 (until 23 November 2020 the limit was DKK 14,100).

Items that are part of other items or items that are intended to be used with another item, such as a computer and a printer or a bookcase in a series of bookcases, are considered one item.

This is why you should consider the total cost of the two (or more) items when you want to depreciate the cost, and you should consider whether it is above or below the limit for minor assets of DKK 33,100 in 2024 (DKK 32,000 in 2023).

Deduction for major expenses

If an expense exceeds DKK 33,100 in 2024 (DKK 32,000 in 2023), you cannot deduct it right away (a write-off). Instead, you have to spread the expense over a number of years. Doing so is called depreciation. You may depreciate an item by a maximum of 25% a year.

If you have several expenses exceeding the limit, the amounts are added up and the total amount is the basis of the depreciation. This is called the diminishing-balance method.

You can easily depreciate acquisitions at a lower rate if, for example, your business income is low one year and you do not need major deductions. The following years you will be able to raise the depreciation rate again (maximum 25%).

When at some point the amount is less than the limit of DKK33,100 in 2024 (DKK 32,000 in 2023) you can depreciate the entire amount at once.

Example of depreciation

• The acquisition price of the machine is DKK 100,000
• The depreciation is DKK 100,000 x 0.25 (25%) = DKK 25,000.
• Balance on 31 December: DKK 100,000 - DKK 25,000 = DKK 75,000.

The following year you can depreciate 25% of the balance of DKK 75,000. If, in relation to the above example, you have a balance of DKK 75,000, it means that you can depreciate DKK 18,750 the following year.

Once your balance is less that the limit of DKK 33,100 in 2024, you can depreciate the balance in your financial statements.

New rule on increased basis of depreciation for brand new green plant and equipment

A new rule has been passed to increase the basis of depreciation to 116% when you buy brand new green plant and equipment or furniture and fittings. You may only apply this rule on plant and equipment that are solely used for business purposes.

The rule applies from 23 November 2020 until 31 December 2022.

Example of increased basis of depreciation

• Acquisition price of electric machine is DKK 100,000
• Increased basis of depreciation (116%) DKK 100,000 x 1.16 (+16%) = DKK 116,000.
• Depreciation in the acquisition year: DKK 116,000 x 0.25 (25%) = DKK 29,000.
• Balance on 31 December: DKK 116,000 - DKK 29,000 = DKK 87,000.

This means that you can use DKK 116,000 as basis of depreciation in the year of acquisition and depreciate the item by a maximum of 25% a year. If you apply the new rule on increased basis of depreciation, you have to depreciate the machine by 25% in its entire life.

Note that you may not write off a balance on an expense if it is less that the limit for minor assets, just as if you applied the ordinary depreciation rules.

New rule may be applied to the following plant and equipment items

• Plant and equipment that solely operate on electricity or battery (such as machines)
• Vans or trucks (petrol, diesel or electricity)
• Furniture and fittings

When you buy the above plant and equipment items, you apply the acquisition price as your basis of depreciation.

New rule cannot be applied to the following plant and equipment items

• Cars and ships
• Machines or items that are or can be run on fossil fuels (such as petrol, diesel, oil, gas and coal.

Further restrictions to apply the new rule

• The plant and equipment item must be bought in the period of 23 November 2020 to 31 December 2022.
• It may only be used for business purposes and not for private purposes.
• It must have a separate account in your bookkeeping.
• You may not write off the item or a balance.

Plant and equipment for both business and private purposes (mixed plant and equipment)

If you use plant or equipment for both business and private purposes, a car for example, you need to depreciate it separately. You cannot depreciate it along with other plant and equipment, and you cannot apply the rule on increased basis of depreciation.

You can only deduct the actual acquisition price, and only the part used for business purposes is deductible in your accounts.

You need to assess how much you use the plant and equipment for private purposes according to how it is actually used. For cars, you use the mileage log to find out how much of the driving is for private purposes and how much is for business purposes. Read more about ‘Using of a private car for business purposes’ further down on this page.

Example of depreciation of a machine for both business and private purposes

• The acquisition price of the machine is DKK 100,000
• The depreciation is DKK 100,000 x 0.25 (25%) = DKK 25,000.
• Private depreciation: DKK 25,000 x 0.40 (40%) = DKK 10,000.
• Business depreciation: DKK 25,000 x 0.60 (60%) = DKK 15,000.
• Balance: DKK 75,000

The following year you can deduct 25% of the balance. If, in relation to the above example, you have a balance of DKK 75,000, it means that you can deduct DKK 7,500 in your financial statements the following year.

Once your balance is less than the limit for minor assets of DKK 14,400, you can deduct the balance related to the business purposes in your financial statements. If, for example, the balance is DKK 14,000 in the beginning of the year, you will be able to deduct the remaining part for business purposes (60%) DKK 8,400 directly in your financial statements.

Read about the rules for depreciation in our Danish-language legal guide

Most often, you are entitled to deduct business expenses you have incurred during a period of six months prior to starting your business. This could, for example, be:

• rent for business premises
• telephone
• salaries
• advertising

The closer to you are to opening your business when you pay a relevant expense, the more likely it is that you will be allowed the deduction.

Expenses for accountancy, legal advice and market research, for example, are not deductible.

You can deduct all expenses for advertising in your accounts, including adverts in newspapers and marketing activities.

You can deduct 25% of expenses for entertainment in your accounts. Entertainment is expenses to complete a business activity or to make or maintain business relations such as:

• food
• meals in restaurants
• beverages
• gifts
• expenses related to anniversaries, birthdays, travelling, outings, etc.

It is important that you keep vouchers and note the reason for the expense as your documentation.

In order to be entitled to deduct expenses for premises in your private home, such premises may not be set up in a way allowing you to use them for private purposes. It is not sufficient that you do not use the premises for private purposes. A room that has been set up as an office, can, for example, almost always be used for private purposes, and as a result the expenses for this room are not deductible.

However, you can fully or partially deduct expenses for desks, cabinets and other office furniture if you are able to document or make probable that such furniture etc. is used in your business. If, for example, you use the office furniture 50/50 in your business and privately, you can only deduct 50% in your accounts.

Expenses for telephone and Internet are fully deductible, but you may have to pay tax on free phone and/or Internet.

Free telephone

You will be taxed on free phone if you run your business from your private home or if you just once bring your work mobile phone home.  In your business accounts, where you have deducted the telephone expenses, you should add DKK 3,200 in 2024 or DKK 3,100 in 2023 to your business results.

Free Internet

You are entitled to fully deduct Internet expenses if you either run your business from home or have access to your business network via your computer (meaning that you have access to almost the same functions and/or documents as when you are at work).

If your Internet connection does not meet any of the above requirements, you are taxed on DKK 3,200 in 2024 or DKK 3,100 in 2023. As a result you need to enter DKK 3,200 in 2024 (DKK 3,100 in 2023) in box 462 of your tax return. In your business tax accounts, where you have deducted the expense for Internet connection, you should add DKK 3,200 in 2024 (DKK 3,100 in 2023) to your business results.

If you are taxed on free telephone as well as Internet connection, you should add a total of DKK 3,200 in 2024 (DKK 3,100 in 2023) to your business results and enter DKK 3,200 in 2024 (DKK 3,100 in 2023) in box 462 of your tax return.

Spouse discount and free telephone/Internet

If you and your spouse are both taxed on free phone and/or Internet connection for the entire year, you are both entitled to a 25% discount. The amount you are taxed on will then be DKK 2,400 in 2024 or DKK 2,325 in 2023. In your business tax account where you have deducted expenses for Internet and telephone, you should add DKK 2,400  in 2024 or DKK 2,325 in 2023 to your business results.

You should each enter DKK 3,200 in 2024 or DKK 3,100 in 2023 in box 462 of your individual tax returns.

Conditions you need to meet to qualify for the discount:

• You must be married or registered partners
• You must be living together at the end of the year
• The total taxable value of the benefits received in the income year must amount to at least DKK 4,100 in 2024 (DDK 4,100 in 2023. This means that, within the tax year, you will jointly be taxes on benefits for at least 16 months.

If you were married during the income year, you are entitled to the spouse discount for the entire income year. This applies irrespective of the time of year you were married.

If you have your own business and use your private car for business purposes, you can deduct the part of your driving that is related to your business by deducting the relevant expenses in your business accounts.

You can calculate expenses for business-related use of car in 2 ways:

• According to a calculated "rental cost" corresponding to the actual business cost (that is the business part of operating costs and depreciation).
• According to the Danish Tax Council’s rates for driving in own car for business purposes. The rates are adjusted annually:

Rates for 2023: DKK 3.75/km until 20,000 km/per year and DKK 2.19 DKK/km after 20,000 km/per year.

Rates for 2024: DKK 3.79/km until 20,000 km/per year and DKK 2.23 DKK/km after 20,000 km/per year.