Deduction for energy taxes
You pay energy taxes to your supplier when you purchase energy products (e.g. electricity, natural gas or oil) or water. If your business is registered for VAT, you are entitled to deduct a share of the expenses for certain purposes described in detail below.
The taxes are stated on the invoice provided by your supplier.
If your business is registered for VAT, you are entitled to deduct a share of the expenses in your VAT return when you use energy products or water for certain purposes.
- Your VAT return contains fields for deduction the following taxes: oil and bottled gas tax, electricity tax, natural gas and town gas tax, coal tax, CO2 tax and water tax.
- If the taxes are deductible, you need to declare the energy taxes in the VAT return in the VAT period in which you received the invoice from your supplier.
If you are not registered for VAT, the energy taxes are not deductible.
When you use electricity in your business registered for VAT, you are generally entitled to deduct a share of the electricity tax.
However, this right does not apply to lawyers, accountants, amusement parks and agencies, which are generally not entitled to deduct the electricity tax at all. Such businesses are normally referred to as ’schedule businesses’ because they are mentioned in schedule 1 to the Danish Electricity Tax Act (Elafgiftsloven).
From 1 January 2022 until 30 June 2022, the electricity tax is DKK 0.9 per kWh. From 1 July 2022 until 30 September 2022, the electricity tax was DKK 0.763 per kWh (DKK 0.9 per kWh in 2021).
As of 1 October 2022 until 31 December 2022, the electricity tax was DKK 0.723 per kWh. Please note that EU regulations decide that you are not entitled to a deduction for the last DKK 0.4. This means that in the fourth quarter of 2022, your business had a deduction of DKK 0.719 per kWh.
As of 1 January 2023 the electricity tax is reduced to DKK 0.8 per kWh.
From 1 January 2021, businesses registered for VAT (excluding schedule businesses) no longer have to meter and calculate the electricity used for process purposes and room heating.
The following is generally deductible:
| Electricity used in business subject to VAT for: | Farming | Schedule businesses |
|---|---|---|
|
Examples of process purposes:
|
1 January - 30 June 2022: DKK 0.899 per kWh 1 July - 30 September 2022: DKK 0.759 per kWh 1 October 2022: DKK 0.719 per kWh As of 1 January 2023: DKK 0.004 per kWh |
No deduction |
| Room heating, hot water or comfort cooling |
1 January - 30 June 2022: DKK 0.899 per kWh 1 July - 30 September 2022: DKK 0.759 per kWh 1 October 2022: DKK 0.719 per kWh As of 1 January 2023: DKK 0.004 per kWh |
1 January - 30 June 2022: DKK 0.899 per kWh 1 July - 30 September 2022: DKK 0.759 per kWh 1 October 2022: DKK 0.719 per kWh As of 1 January 2023: DKK 0.004 per kWh |
| Private consumption | No deduction | No deduction |
Your supplier must state the amount of the total electricity tax
The DKK 0.80 tax per kWh is refunded for the part which is deductible as process purposes and heating, etc. apart from DKK 0.004.
Example of electricity tax deduction
A business (which is not a schedule business) both has sales that are subject to VAT and sales that are exempt from VAT. The sales subject to VAT account for 60% of the total sales. The business uses electricity for process purposes in connection with both sales subject to VAT and sales exempt from VAT and may thus deduct 60% of the VAT from the electricity bill.
In the first three months of 2021, the business used 10,000 kWh. The electricity tax deduction for these three months is calculated as follows:
| Tax/deduction | Calculation | Amount |
|---|---|---|
| Electricity tax in invoice | 10,000 kWh x DKK 0.903 = | DKK 9,030 |
| Normal deduction | 10,000 kWh x DKK 0.899 = | DKK 8,990 |
| Deduction on account of partial VAT deduction right | 60% x DKK 8,990 | DKK 5,394 |
Example updated on 14 December 2021.
When you use water in your business registered for VAT, you are generally entitled to deduct the full water tax.
If you both use water in connection with sales that are exempt from VAT and sales that are subject to VAT, you are only entitled to deduct the share of the water tax which concerns your business activities subject to VAT.
In 2022, the water tax inclusive of drinking water contribution totals DKK 6.37 per cubic metre (January 2021 DKK 6.18 and in the rest of 2021 DKK 6.37 per cubic metre).
When you use oil, bottled gas, natural gas, town gas or coal in your business registered for VAT, you are generally not entitled to deduct the energy tax if you use the products for:
- room heating, hot water or comfort cooling
- motor operation
Farmers, market gardeners, fishermen and similar may, however, deduct a share of the energy tax for motor operation, for example for diesel fuel for tractors or combine harvesters.
If you use the products for other purposes in your business registered for VAT, for example gas for the cooking in your restaurant, you are generally entitled to deduct a share of the energy tax. You must calculate the amount based on the energy tax in the invoice yourself.
Farmers, market gardeners, etc.
In 2022, these industries can deduct 98.4% of the energy tax in the invoice.
Other industries
Generally, other industries need to calculate the deduction based on the energy content of the fuel. This is, however, often difficult. In 2022, the deduction can be determined by reducing the tax on the invoice by 7.14 (2021:7.17%). Consequently, other industries are entitled to deduct 92.86% of the energy tax in the invoice.
If you use the products in connection with both sales that are exempt from VAT and sales that are subject to VAT, you are only entitled to deduct the share of the energy tax which concerns your business subject to VAT.
Example of oil tax deduction
A production company has both sales that are subject to VAT and sales that are exempt from VAT. The sales subject to VAT account for 60% of the total sales. The company uses oil for both the sales subject to VAT and the sales exempt from VAT and for purposes other than room heating, hot water, comfort cooling or motor operation. This allows the company to deduct 60% of the VAT on the oil bill:
| Tax/deduction | Calculation | Amount |
|---|---|---|
| Oil tax in invoice | DKK 10,000 | |
| Normal deduction | DKK 10,000 x 92.86% | DKK 9,286 |
| Deduction on account of partial VAT deduction right |
60% x DKK 9,286 | DKK 5,571.6 |
Example updated 14 December 2021.
The invoice from your supplier will also include a CO2 tax. This tax is not deductible according to these rules.
The invoice will also include an NOx tax. This tax is not deductible at all.
Whenever you purchase and use fuels (oil, gas or coal) in your business, you also pay CO2 tax. This tax is stated in the invoice provided by your supplier.
CO2 tax is generally not deductible.
For further legal information in Danish see our legal guide .