Denmark Fintech and Payment Institutions Tax Guide

VAT Treatment of Payment and Financial Services

The VAT treatment of fintech services is the most consequential tax issue for the sector. The distinction between exempt payment services and taxable digital services determines whether the fintech can recover input VAT and whether it must charge VAT to customers.

Payment Services — VAT-Exempt (ML §13, nr. 11)

• Core payment transactions: Transfers of funds, direct debit processing, credit card acquiring, and payment initiation services under PSD2 are exempt from VAT. This includes merchant acquirers (indsamlingsvirksomheder), payment gateways, and AIS/PIS providers whose services relate directly to the transfer of funds.
• What qualifies: To qualify as exempt, the service must constitute a transfer of funds — i.e., result in a change in the legal and financial situation of the parties involved. Services that merely facilitate information flows or provide technical infrastructure without handling the actual transfer are not exempt.
• PSD2 licences: Holding a PSD2 licence (payment institution or e-money institution licence from the Danish FSA) is strong evidence that the core services qualify as payment services for VAT purposes. However, the VAT treatment is ultimately governed by the VAT Directive/ML §13, not the fintech licence — the substance of the service matters, not the regulatory label.
• Payment initiation services (PIS): PIS providers (e.g., Tink, Nordigen) initiate payments on behalf of the payer. The service of initiating the payment is exempt, but any separate account information service (AIS) component may be taxable. Bundled PIS/AIS offerings must be apportioned — flat-rate apportionment of 70:30 (exempt:taxable) is commonly used but should be supported by a cost analysis.
• Account information services (AIS): Pure AIS (aggregation of account data without payment initiation) is not a payment service — it is generally taxable at 25% VAT as a digital service. The CJEU ruled in Bookit (C-607/14) and subsequent cases that simply processing payment data without handling the actual transfer does not qualify as a payment transaction.

E-Money Issuance — VAT-Exempt

• Issuance of e-money: The issuance of electronic money (elektroniske penge) is VAT-exempt under ML §13, nr. 11 when the e-money is issued at face value and used for payment. The margin earned by the e-money issuer (float income on outstanding e-money) is exempt.
• E-money vs. crypto-assets: Danish e-money issued under the E-Money Directive (e.g., by Lunar, Pleo) is VAT-exempt. Crypto-assets (Bitcoin, Ethereum) are treated differently — see our Crypto Tax Guide → and Business Crypto Guide → for their VAT treatment.
• Exchange of e-money: The exchange of e-money for fiat currency (and vice versa) is exempt as a payment service. Fees charged for ATM withdrawals, card issuance, and account maintenance are exempt when they relate to the e-money account.

Services That Are Normally Taxable at 25%

• Software-as-a-Service (SaaS) platforms: Subscription fees for fintech SaaS platforms (e.g., accounting software, invoice management, portfolio trackers) are taxable at 25% VAT, unless the platform itself executes payment transactions as a principal.
• Data services and analytics: Provision of financial data, transaction categorisation, credit scoring, and financial analytics tools are taxable at 25%. These are digital services, not financial services.
• Referral and lead generation: Fees for introducing customers to financial institutions (comparison websites, affiliate marketing) are taxable at 25% — they are not exempt intermediation services under the financial services exemption.
• KYC/AML compliance services: Third-party KYC, identity verification, and AML screening services for fintechs are taxable at 25% when provided by a separate entity. An exception exists if the service is so closely related to a core payment service that it forms a single indivisible economic supply — this is tested on a case-by-case basis.
• API access fees: Charges for API access to payment or account data (e.g., open banking APIs) are taxable at 25% unless the API call is an integral part of a specific payment transaction.

Partial VAT Exemption and Pro-Rata Recovery

• Fintechs making both exempt and taxable supplies must apportion input VAT recovery using the turnover-based pro-rata method under ML §37. Input VAT directly attributable to exempt supplies (e.g., outsourced payment processing costs) is not recoverable. Input VAT directly attributable to taxable supplies (e.g., software development for the SaaS platform) is fully recoverable. Residual costs (office rent, IT infrastructure) are apportioned based on the ratio of taxable turnover to total turnover.
• De minimis rule: If the value of taxable supplies (including ancillary transactions) does not exceed 25,000 DKK per year, the fintech can treat all supplies as exempt — simplifying compliance but forfeiting all input VAT recovery. This is rare for fintechs with significant SaaS or data revenue.
• VAT grouping (momsfællesregistrering): Fintech groups can apply for VAT grouping to simplify input VAT recovery. Under a VAT group, all supplies between group members are disregarded for VAT purposes, and external supplies are treated as made by the group. This is particularly useful when one group entity handles the exempt payment services and another handles taxable SaaS — the group's combined input VAT recovery rate is higher. See our VAT Groups Guide → for eligibility rules.

Crowdfunding and P2P Lending Platforms

• Reward-based crowdfunding: Contributions to reward-based crowdfunding campaigns (e.g., Kickstarter, Booomerang) are treated as prepayments for the promised reward. VAT applies at the point the reward is delivered — standard VAT rules for the product/service apply. Crowdfunding platform fees are taxable at 25%.
• Equity crowdfunding: Platform fees for equity crowdfunding (fractional ownership of shares in startups) are exempt from VAT as intermediation in the sale of shares (ML §13, nr. 11). This exemption covers the introduction of investors, due diligence coordination, and settlement services. If the platform charges separate success fees or advisory fees, those may be taxable.
• P2P lending: Platform fees for matching lenders with borrowers are exempt from VAT when the platform is directly involved in the loan arrangement (intermediation of credit under ML §13, nr. 11, litra b). Pure matching/listing services without active involvement may be taxable. Interest income earned by lenders is exempt from VAT. Bad debt relief for P2P lenders: write-offs of principal on P2P loans follow standard debt write-off rules — deductible when the loss is realised and documented.
• Invoice trading: Platform fees for invoice trading (factoring-like services) are exempt when the platform acts as an intermediary in the transfer of receivables. If the platform itself purchases the invoices (principal), the discount/interest margin is exempt as a financial service.

BNPL and Consumer Credit

• Buy Now, Pay Later (BNPL): Merchant discount fees paid by retailers to BNPL providers (e.g., Anyday, ViaBill, Klarna) are exempt from VAT as payment processing fees. Late payment fees and interest charged to consumers are also VAT-exempt as credit provision.
• Credit assessment fees: Separate fees for credit checks or BNPL limit increases charged to merchants or consumers are taxable at 25%, as they are not payment transactions but standalone credit assessment services.
• Provision for bad debts: BNPL providers can deduct specific bad debt provisions (nedskrivninger) under standard debt write-off rules. The provision is deductible when the debt is deemed uncollectible (typically after 90–180 days past due). General provisions are not deductible. For VAT purposes, bad debt relief (ML §49, stk. 1) allows recovery of VAT paid on bad debts from taxable supplies after 3 years and 3 months from the due date — this does not apply to exempt payment services.
• Consumer credit licensing: BNPL providers that offer credit beyond the payment deferral (e.g., 3+ months instalments) may need a consumer credit licence (kreditforbudsloven). The tax treatment of interest income is identical — exempt financial service income, taxed at 22% corporate tax.

Digital Wallets and Stored Value

• Digital wallet services: Account management fees, ATM withdrawal fees, and card replacement fees are VAT-exempt as payment-related services. Currency conversion fees within a digital wallet are exempt as exchange transactions.
• Stored value/unspent balances: Float income on unspent balances in digital wallets (e.g., MobilePay, Apple Pay balances) is exempt financial income. The VAT treatment follows the underlying service — the wallet's float is not a separate supply.
• Escheatment (hævd): Unclaimed balances in digital wallets that revert to the provider after a period of inactivity (typically 3 years under Danish law) are taxable income when the liability is extinguished. SKAT treats the reversal as a taxable gain in the period the statute of limitations expires.

Fintech Corporate Tax and R&D

• Standard corporate tax at 22%: Fintech companies pay the standard 22% corporate tax on profits from all services — exempt payment income and taxable digital service income alike. The VAT characterisation does not affect corporate tax treatment.
• R&D super-deduction: Fintechs investing in software development, algorithms, and payment infrastructure may qualify for the enhanced R&D super-deduction (up to 120% by 2028). Qualifying activities include: developing new payment protocols, fraud detection machine learning models, blockchain-based settlement systems, and biometric authentication. See our R&D Tax Credits Guide →.
• Capitalisation of development costs: Software development costs for fintech platforms must be capitalised and amortised under the Danish cancellation balance system (afskrivning på software). The amortisation period is typically 3–7 years depending on estimated useful life. Development costs qualify for the R&D super-deduction only if they meet the R&D definition — routine software maintenance and bug fixes do not qualify.
• Employee shares: Fintech startups commonly use employee warrants and share schemes. See our Employee Shares Guide → for the 2026 reform taxing unrealised gains on unlisted shares upon exit.
• Interest deduction limitation: Fintechs with significant debt financing face interest deduction limitations under SEL §11 C (EBITDA-based safe harbour at 4% of EBITDA or 35.7 million DKK, whichever is higher). Fintech groups with excess debt should document arm's-length financing under the tynd kapitalisering rules.

Cross-Border Fintech Services

• B2B payment services: Payment services provided to business customers outside Denmark are B2B supplies — place of supply is where the customer is established. If the customer is outside the EU, the service is outside the scope of Danish VAT (no Danish VAT charged). If the customer is in another EU country, the service is VAT-exempt with the right to deduct (if exempt) or subject to reverse charge (if taxable).
• B2C payment services: Payment services to consumers outside Denmark — place of supply is where the consumer is established. For consumers in other EU countries, the service is subject to VAT in the consumer's country under the One-Stop Shop (OSS) rules if taxable, or exempt without VAT if it qualifies as a payment service. For consumers outside the EU, the service is outside the scope of Danish VAT.
• EU payment institution passport: Danish-licensed payment institutions can passport their services across the EU under PSD2. The tax consequences: VAT exemption applies uniformly across the EU, but local filing obligations may arise if the institution has a branch or permanent establishment in the destination country. Danish fintechs with cross-border operations should assess PE risk carefully — see our Permanent Establishment Guide →.
• Withholding tax on cross-border interest: Interest paid by Danish fintechs to non-resident lenders is generally not subject to Danish withholding tax (interest is not subject to kildeskat under Danish domestic law, unlike dividends and royalties). However, payments on profit-participating loans or hybrid instruments may be recharacterised as dividends and subject to 22% withholding tax.

For general company formation for fintechs, see our Starting a Business Guide →. For e-money and payment institution licensing requirements (regulated by the Danish FSA), consult FSA guidance — this guide covers tax only.