Small Businesses Face Crushing New VAT Burden

Sandra Oparaocha

December 27, 2025
10:42 am

New VAT rules in Denmark will soon affect private instructors and small businesses, forcing them into more paperwork and uncertainty as they adapt to EU tax rulings.

More Bureaucracy for Independent Teachers

From January 1, 2026, new Danish VAT regulations will extend to many private education and leisure services. Singing teacher Morten Møllemand, based in Copenhagen, is one of many small business owners struggling to understand how the new tax scheme will impact his work. After years of operating a simple one-person business, he now faces complicated calculations and registration duties that used to require only one annual submission.

The rules, based on EU court decisions that Denmark must follow, mean private instructors in fitness, dance, music, art, and crafts will need to charge VAT if their annual turnover exceeds 50,000 kroner. Those working through municipal programs or recognized associations will remain VAT-exempt.

Different Rules by Age and Purpose

Under the new regulation, Morten must divide his adult students into three categories. Learners under 30 remain VAT-free, as do professionals who take lessons for work-related reasons such as acting or performing. But adults over 30 who attend privately for pleasure will now pay 25% VAT.

This creates challenges in documentation. Many teachers are unsure how to verify age and profession legally. Should they request photo identification or store copies of passports? Some fear they might violate data protection rules in the process. Then comes the added complexity of differentiating between VAT payments and the so-called payroll tax, both unfamiliar to small operators who are not accountants.

Small Businesses Under Pressure

The association for small and medium-sized enterprises, SMV, warns that these changes will hit small companies hardest. They have fewer staff and less financial room to deal with tax compliance and technical updates. Some entrepreneurs already fear customers will walk away as prices rise, while others are considering closing down altogether.

For many, the shift feels sudden. Even though the EU rulings were issued back in 2019, detailed guidance from Danish authorities only arrived years later. Industry advisors criticize how long it has taken to explain the new rules clearly.

Authorities Acknowledge the Challenges

Tax Minister Ane Halsboe-Jørgensen admits the transition brings added complexity. She has pushed to limit the impact but notes that Denmark must implement EU decisions even if they bring more paperwork. Webinars and online help are available, but many small business owners say they still lack exact information on documentation and distinction requirements.

According to the ministry, Denmark managed to secure exemptions for children and young people, keeping their cultural education VAT-free. The minister explained that her predecessors had spent years trying to balance EU law with Denmark’s current system, but avoiding the VAT expansion proved impossible.

Activities Covered by the New Rules

The reform applies to both individual instructors and commercial enterprises teaching fitness, yoga, singing, musical instruments, dancing, ceramic art, and other leisure courses. Training under publicly supported programs or adult education centers remains outside VAT. Chess and bridge were originally scheduled to be taxed as well, but their inclusion has been postponed until 2027.

For most instructors, the upcoming change means both higher prices and more administrative duties. It may also create new demand for professional accounting assistance, as individuals seek help understanding VAT registration and Denmark’s overall income tax system. For anyone unsure where to turn, several services now help foreigners and small entrepreneurs find qualified accounting experts through sites such as best accountants in Denmark for foreigners.