Order on Requirements for the Tax Annual Accounts of Larger Enterprises

Order on Requirements for the Tax Annual Accounts and Other Matters for Larger Enterprises (The Minimum Requirements Order for Larger Enterprises)

Pursuant to Section 6, Paragraph 2, of the Tax Control Act, Act No. 1535 of 19 December 2017, and upon the recommendation of the Tax Council, the following is enacted:

Chapter 1 Scope of Application

Section 1. This Order applies to:

1. Electricity companies, cf. Section 1, Paragraph 1, No. 2 e, of the Corporation Tax Act, as well as municipalities operating network activities, cf. Section 1, Paragraph 1, No. 2 f, of the Corporation Tax Act,
2. Cooperative associations, consumer cooperatives, and associations, cf. Section 1, Paragraph 1, Nos. 3, 3 a, and 4, of the Corporation Tax Act,
3. Enterprises taxed under the Oil Tax Act,
4. Enterprises taxed under the Tonnage Tax Act,
5. Credit institutions, insurance companies, pension funds, mortgage credit institutions, stockbroker companies, and similar financial enterprises, including enterprises covered by Section 1, Paragraph 1, Nos. 2 a, and 5 b, of the Corporation Tax Act,
6. Mutual insurance associations and investment associations, etc., cf. Section 1, Paragraph 1, Nos. 5 and 5 a, of the Corporation Tax Act,
7. Business estates of deceased persons,
8. Companies subject to joint taxation under Section 31 A of the Corporation Tax Act, which were jointly taxed under Section 31 A of the Corporation Tax Act in the preceding income year, or which are taxed on a reassessment balance under Section 15 of Act No. 426 of 6 June 2005,
9. Taxable legal persons, including business foundations and associations covered by the Foundation Taxation Act, which have a net turnover of more than DKK 100 million for the relevant income year, and
10. Business activities with more than two owners, where the result is taxed as personal income, including under the Business Tax Act, and where none of the owners participate significantly in the business's operations, unless the business is covered by the rules on joint tax accounts, cf. Section 29 of the Tax Assessment Act.

Paragraph 2. In the case of joint taxation, the threshold amount in Paragraph 1, No. 9, applies to the total net turnover of the companies to be jointly taxed.

Section 2. The Danish Tax Administration may grant exemptions, in whole or in part, from this Order for individual or groups of taxable persons.

Chapter 2 General Requirements for the Tax Annual Accounts and Their Storage

Section 3. The tax annual account must be submitted together with the information form for the business and must be prepared according to tax principles or must contain tax corrections (conversion) and specifications to the accounts, cf. Chapters 3-11.

Paragraph 2. The tax annual account must include a profit and loss statement, a balance sheet, and a specification of movements in the enterprise's equity.

Paragraph 3. The accounts with accompanying information, cf. Section 4, must be presented in a clear and comprehensible manner so as to form the basis for the Danish Tax Administration's control.

Paragraph 4. The tax conversion to the annual accounts must be prepared in such a way that it is possible to establish the connection to the previous year's tax assessments.

Section 4. Bookkeeping must be organized so that all registrations can be traced to the tax assessments. The tax assessments must be resolvable into the registrations of which they are composed.

Section 5. In cases where the Danish Business Authority has received the annual report, the enterprise may refrain from submitting the annual report as part of the tax annual account.

Section 6. The information mentioned in Section 4 must be stored for 5 years calculated from the end of the accounting year.

Paragraph 2. The provision in Paragraph 1 does not apply to retail businesses' cash register tapes and similar internal vouchers, which only need to be stored for 1 year from the time of signing the annual accounts.

Section 7. The tax annual account may be submitted electronically according to the Danish Tax Administration's further instructions.

Danish Gazette A 2018 Published on 22 November 2018 14 November 2018. No. 1295. Ministry of Tax, ref. no. 2018-1806 AN013536

Chapter 3 Information for the Tax Annual Account

Section 8. Net turnover must be calculated taking into account receivables for goods and services at the beginning and end of the accounting year.

Paragraph 2. Net turnover must be disclosed separately. If the value of work in progress for third parties is adjusted in net turnover, the adjustment must be stated separately.

Section 9. The following information must be kept in the enterprise if not incorporated into the bookkeeping:

1. Receivables and liabilities regarding goods and services at the end of the accounting year, with the name and address of the debtor and creditor.
2. Deposits in credit institutions or similar, with the location and account number.
3. Securities, where capital gains or losses are taxable under the Capital Gains Tax Act or the Share Gain Taxation Act, with the acquisition cost, nominal value, and market value. If the securities are held in a depot, the depot must be stated to the extent that the information has not been reported to the Danish Tax Administration. For interest-bearing securities, where the principal or remaining debt is regulated in Danish kroner, the stated interest rate at the time of issuance must be stated.
4. Other receivables with the debtor's name and address.
5. Liabilities as mentioned in Section 18, No. 3, with the creditor's name and address and possibly account number.

Paragraph 2. At the end of the enterprise's accounting year, a separate calculation of work in progress for third parties must be prepared, distributed across each individual order with a detailed explanation of how the valuation was performed.

Section 10. Expenses, including consumption of goods, wages, and other personnel expenses, must be disclosed separately by type. If an expense is used for capital purposes or private purposes, the transfer to this must be disclosed separately.

Paragraph 2. Expenses must be calculated taking into account the value of work in progress for third parties at the beginning and end of the accounting year.

Paragraph 3. Consumption of goods and services must be calculated taking into account liabilities regarding these services at the beginning and end of the accounting year.

Section 11. Income and expenses arising from other than ordinary operations must be shown as extraordinary income and extraordinary expenses and specified by type, unless they are of insignificant importance. The division into ordinary and extraordinary income and expenses does not apply to financial enterprises.

Section 12. The following must be stated separately:

1. Entertainment expenses, cf. Section 8, Paragraph 4, of the Tax Assessment Act.
2. Payments of tax-free allowance for travel and transport, cf. Section 9, Paragraph 5, Section 9 A, Paragraph 9, Section 9 B, Paragraph 4, and Section 31, Paragraph 3, Nos. 3 and 4, of the Tax Assessment Act.

Section 13. If interest income and interest expenses are accrued, the sum of the interest income and interest expenses that fell due in the accounting year, as well as accrual items at the beginning and end of the accounting year, must be disclosed separately.

Section 14. Receivables for goods and services and for lending or financing activities must be stated without write-downs.

Paragraph 2. Write-downs for established and expected losses on debtors must be stated separately. Financial enterprises must separately disclose write-downs and losses on loans and guarantees under Section 25, Paragraph 6, of the Capital Gains Tax Act.

Paragraph 3. Holdings of securities, including financial contracts, must be specified by type with the nominal value and market value. If the taxable person trades in securities as their business, it is sufficient that the specification appears in the bookkeeping. The same applies to legal persons taxable under the Corporation Tax Act or the Foundation Taxation Act.

Section 15. Inventory must be disclosed separately.

Paragraph 2. At the end of the accounting year, a physical count of the inventory must be performed, the size of which must be documented by a count list in which the individual goods are stated and identified to the necessary extent. If the inventory can at any time be calculated on the basis of a reliable inventory accounting or similar, the physical count may be performed at other times than at the end of the accounting year.

Paragraph 3. If deductions for obsolescence were calculated in determining the value of the inventory, or if an share of indirect production costs or advance payments was included in determining the value of work in progress for third parties, the relevant amounts must be disclosed separately.

Section 16. Assets on which tax depreciation can be performed must be specified so as to provide the necessary information for control of the depreciation basis and the calculation of the depreciation performed. For tax depreciation on assets depreciated under Chapter 3 of the Depreciation Act, the depreciation performed on the asset for the entire ownership period must also be stated. As far as tax depreciation on assets not depreciated under Chapter 2 of the Depreciation Act is concerned, the acquisition date of the asset must also be stated.

Paragraph 2. The requirement for specification according to Paragraph 1 applies correspondingly to advance depreciation under Chapter 4 of the Depreciation Act. The specification must include:

1. The assets covered by the advance depreciation, with the agreed or calculated acquisition cost, base amount, and advance depreciation basis.
2. The stated order or planning year and delivery or completion date.
3. The advance depreciation performed.
4. The depreciation-eligible acquisition cost that must be included in the depreciation balance.
5. Calculation of the remaining base amount and advance depreciation basis upon acquisition of one of several assets with the same order or planning year.

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Section 17. The value and write-downs of farmers' livestock holdings at the beginning and end of the accounting year must be disclosed separately. The valuation must be stated with the number of livestock distributed across the individual livestock groups.

Paragraph 2. Farmers who have chosen to keep complete accounts of holdings must separately state the value of such holdings at the beginning and end of the accounting year.

Section 18. Liabilities must be specified at least as follows:

1. Suppliers of goods and services.
2. Liabilities secured by mortgage in real estate, regarding which reporting is performed under Sections 13 or 14 of the Tax Reporting Act.
3. Other liabilities.

Section 19. In the calculation of equity, consumption and private share of expenses, etc., must be shown separately.

Section 20. If set-off has occurred between expense and income items or between assets and liabilities, the gross figures must be shown.

Chapter 4 Partners, General Partners, Limited Partners, and Joint Venture Partners

Section 21. Partners, general partners, limited partners, and joint venture partners (participants), who are not covered by Section 29 of the Tax Assessment Act, may choose to have the provisions in Chapters 2 and 3 fulfilled by the respective partnership, limited partnership, or joint venture, which thereafter issues the annual accounts with accompanying corrections and specifications to the participants for use in their income assessments.

Paragraph 2. Participants must, in the calculation of taxable income, specify their income from participation in the partnership, limited partnership, or joint venture.

Paragraph 3. If participants use tax accrual or valuation methods or perform tax depreciation or write-downs that deviate from the annual accounts as mentioned in Paragraph 1, all corrections must be stated separately.

Chapter 5 Business Owners under the Business Tax Scheme according to Part I of the Business Tax Act

Section 22. The enterprise's bookkeeping must be organized so that the enterprise's economy and the business owner's private economy are accounted for separately.

Paragraph 2. The following must be registered separately:

1. Contributions and withdrawals.
2. Movements on an intercompany account between the enterprise and the business owner.

Section 23. The following must be disclosed separately:

1. The sum of all contributions and the sum of all withdrawals.
2. Values transferred to the business owner with effect for the income year, but which are held for later withdrawal in the enterprise's accounts at the end of the accounting year.
3. The balance of the intercompany account at the end of the accounting year.

Paragraph 2. If contributions or withdrawals consist of other values than cash, it must be disclosed separately what values are involved, and it must be possible to disclose upon request how the valuation was performed.

Section 24. The contribution account at the end of the income year must be disclosed. The adjustments that must be performed according to Section 3, Paragraph 6, of the Business Tax Act must be disclosed separately. For the income year in which an enterprise transitions to taxation under the business tax scheme, the contribution account must be specified upon entry.

Paragraph 2. The account for accumulated profit at the end of the income year must be disclosed separately.

Section 25. The capital return basis at the beginning of the income year must be specified separately. For the income year in which an enterprise transitions to taxation under the business tax scheme, the capital return basis must be specified upon entry.

Paragraph 2. If a specification of the necessary corrections to equity is attached, the capital return basis after the end of the year in which the enterprise transitions to taxation under the business tax scheme may be calculated based on the enterprise's equity at the beginning of the income year.

Paragraph 3. The calculation and size of the capital return must be disclosed separately.

Paragraph 4. The calculation and size of interest corrections according to Section 11, Paragraphs 1-3, of the Business Tax Act must be disclosed separately.

Section 26. If the taxable person operates several enterprises, the provisions in this chapter must be fulfilled collectively for all these enterprises.

Chapter 6 Business Owners under the Capital Return Scheme according to Part II of the Business Tax Act

Section 27. The capital return basis at the beginning of the income year must be specified separately. For the income year in which an enterprise transitions to taxation under the capital return scheme, the capital return basis must be specified upon entry.

Paragraph 2. If a specification of the necessary corrections to equity is attached, the capital return basis after the end of the year in which the enterprise transitions to taxation under the capital return scheme may be calculated based on the enterprise's equity at the beginning of the income year.

Paragraph 3. The calculation and size of the capital return must be disclosed separately.

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Chapter 7 Foundations and Associations Taxable under Section 1 of the Foundation Taxation Act

Section 28. The calculation basis for provisions for consolidation of foundation capital according to Section 5, Paragraph 1, of the Foundation Taxation Act must be disclosed with the statement of all distributions made in the income year and with the statement of all amounts distributed in the income year from previous years' provisions for charitable or otherwise public purposes. The percentage used for calculating the consolidation provision must be stated.

Paragraph 2. The adjustment figure used for calculating consolidation provisions according to Section 5, Paragraph 3, of the Foundation Taxation Act must be disclosed.

Chapter 8 VAT Information

Section 29. Registered taxable persons under the VAT Act, except for financial institutions as mentioned in Section 1, Paragraph 1, No. 5, must disclose the size of outgoing and incoming VAT in the accounting period.

Chapter 9 Reconciliation of Information Reported to the Danish Tax Administration

Section 30. Those subject to reporting must disclose the size of wages and fees, etc., that are included in the accounts, and show a reconciliation with the wages and fees, etc., that have been reported to the Danish Tax Administration under Sections 1, 2, 4, 5, and 46 of the Tax Reporting Act, cf. Order on Tax Reporting, etc.

Section 31. Foundations and associations taxable under Section 1 of the Foundation Taxation Act must disclose the size of distributions as mentioned in Section 4 of the Foundation Taxation Act and show a reconciliation with the information reported to the Danish Tax Administration under Section 25 of the Tax Reporting Act.

Section 32. Those subject to interest reporting must disclose the size of interest income and interest expenses that are included in the accounts, and show a reconciliation with the interest that has been reported to the Danish Tax Administration under Sections 12-14 of the Tax Reporting Act.

Section 33. Employer associations, trade unions, and other professional associations, cf. Section 13 of the Tax Assessment Act, must disclose the size of membership fee payments that are included in the accounts, and show a reconciliation with the membership fees that have been reported to the Danish Tax Administration under Section 31 of the Tax Reporting Act.

Section 34. If those subject to reporting as mentioned in Sections 30-33 use an accounting year that deviates from the calendar year, it must be shown how the reported amounts are distributed across the parts of the calendar year that constitute the accounting period.

Chapter 10 Reassessment Balances Regarding Previously Jointly Taxed Foreign Enterprises, etc.

Section 35. This chapter applies to enterprises, etc., that are reassessed on a reassessment balance under Section 15, Paragraphs 8 and 9, of Act No. 426 of 6 June 2005. Real estate abroad is equated with a permanent establishment abroad.

Section 36. The annual account in Section 3 includes for these enterprises, etc., additionally:

1. A description of the group structure in both Denmark and abroad at the beginning and end of the income year, with an explanation of changes during the year.
2. Movements during the year and the amount transferred to the following year for the reassessment balance for each subsidiary abroad and for each permanent establishment of a Danish company where there is a reassessment balance, including information on the transfer of the balance between companies or permanent establishments and the conditions for the transfer. Upon cessation of business in a foreign company or permanent establishment where there is a reassessment balance, it must be disclosed how the business is continued.
3. Information on whether the provisions in Section 5 G of the Tax Assessment Act on double deduction are fulfilled.
4. Information on the tax paid in the home country, to the extent that the possibilities for deduction for taxes paid abroad under Section 33, Paragraph 5, of the Tax Assessment Act are used, as well as information on subsequent changes to the foreign tax paid for previous years.
5. Information on how the foreign subsidiary has calculated the taxable income in the home country with regard to the rules in Section 5 I of the Tax Assessment Act and the rules on maximization of credit.

Paragraph 2. Upon request, enterprises, etc., must be able to document the tax paid in the home country within 1 month, cf. Paragraph 1, No. 4.

Paragraph 3. Upon request, enterprises, etc., must within 3 months be able to show the internal accounts for the foreign enterprises, etc., that are included in the Danish parent company's group accounts (group consolidation) or its higher parent company, where the Danish parent company is exempt from preparing group accounts according to accounting legislation. At the same time, an explanation must be provided of the connection between the official subsidiary accounts and the internal accounts.

Paragraph 4. Upon request, enterprises, etc., must disclose whether losses have been disregarded, cf. Section 33 H of the Tax Assessment Act, and hereunder could show a calculation of the amount that has been disregarded and carried forward according to Section 12 of the Corporation Tax Act.

Chapter 11 Entry into Force, etc.

Section 37. This Order enters into force on 1 January 2019.

Paragraph 2. This Order has effect for information forms, etc., that must be submitted for the income year 2018 and later, cf. however Paragraph 4.

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Paragraph 3. Order No. 593 of 12 June 2006 on requirements for the tax annual accounts, etc., for larger enterprises (The Minimum Requirements Order for Larger Enterprises) is repealed.

Paragraph 4. For legal persons that must self-assess for the income year 2018 in the calendar year 2018, the previously valid Order No. 593 of 12 June 2006 on requirements for the tax annual accounts, etc., for larger enterprises (The Minimum Requirements Order for Larger Enterprises) applies for the income year 2018, cf. Section 90, Paragraph 4, of Act No. 1535 of 19 December 2017.

The Ministry of Tax, 14 November 2018 KARSTEN LAURITZEN / Per Hvas

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