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.

Report VAT deductions

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).

In 2019, the electricity tax totals DKK 0.884 per kWh.

Different rates apply depending on what you use the electricity for. You may deduct most of the electricity tax if the electricity is used for the purposes known as process purposes. The following is generally deductible:

Electricity used in business subject to VAT for: Farming, market gardening, fishing and similar Schedule businesses
Examples of process purposes:
  • operation of machinery, production facilities and IT equipment
  • lighting
  • pumps and fans for ventilating the business's premises
2019: DKK 0.88 per kWh No deduction
Room heating, hot water or comfort cooling 2019: DKK 0.625 per kWh 2019: DKK 0.625 per kWh
Private consumption No deduction No deduction

Your supplier must state the amount of the total electricity tax

Example (2019 figures):
DKK 0.884 x number of kWh and the part which can be deductible as process purposes apart from DKK 0.004 (DKK 0.88 x number of kWh).

As a general rule, you are required to separately meter the electricity used in the business for purposes other than process purposes, such as for room heating. However, electricity should not be metered if you are only required to distribute the energy consumed between private and business use. In such cases, the distribution may be estimated. A normal single-family home is estimated to use 4,000 kWh per year on lighting etc.

If you both use electricity 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 electricity tax which concerns your business subject to VAT. 

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 2019, the business used 10,000 kWh. The electricity tax deduction for these three months is calculated as follows:

Electricity tax in
invoice
10,000 kWh x DKK 0.884 = DKK 8,840
Normal deduction 10,000 kWh x DKK 0.88 = DKK 8,800
Deduction on ac-
count of partial
VAT deduction right
60% x DKK 8,800 DKK 5,280

Example updated on 4 January 2019.

When you use water in your business registered for VAT, you are generally entitled to deduct the full water tax inclusive of drinking water contribution.

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 2019, the water tax inclusive of drinking water contribution totals 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 2019, these industries can deduct 98.2% 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 2019 the deduction can be determined by reducing the tax on the invoice by 8.01%. Consequently, other industries are entitled to deduct 91.99% 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:

Oil tax in invoice   DKK 10,000
Normal deduction DKK 10,000 x 91.99% DKK 9,199
Deduction on account of partial
VAT deduction right
60% x DKK 9,199 DKK 5,519

Example updated 4 January 2019.

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.

Please see our legal guide (in Danish) for further legal information.