A correctly prepared invoice is not just an administrative document - it's a legal requirement. Legislation sets clear requirements for the content of the invoice, and compliance with these is crucial for both VAT settlement and documentation in business transactions. According to the VAT regulation, an invoice must include information about both the buyer and seller, a unique invoice number and a clear description of the goods or services provided, among other things. This article provides an overview of the main legal requirements for invoices and practical advice to ensure your invoicing complies with current regulations
1. correct invoice information
There are certain material requirements that an invoice must meet. It is therefore important to make sure that an invoice is filled out correctly. According to section 57(1) of the VAT Executive Order, an invoice must contain information about the buyer and seller, an invoice number, an issue date, a description and quantity of the goods or services sold and the agreed price. Remember to always (as a minimum) include this information to comply with the legal requirements for invoices.
2. Set a due date
It is important for you as a creditor that the due date is clearly stated on the invoice so that the buyer is in no doubt when the invoice is due.
Specifying a due date is also part of the general legal requirements for invoices that ensure clarity in payment terms.
The due date determines the date from which you as a creditor can claim interest on a receivable. There are no rules on when the due date should be set, but normal practice is 7-21 days after the date of issue.
3. Pay attention to the process interest rate
If an invoice is overdue, you as a creditor have the right to claim interest on the overdue amount. The rules for charging interest depend on whether the buyer is a consumer or a trader.
If the buyer is a consumer, certain mandatory rules apply regarding the charging of interest. According to section 3(2) of the Interest Act, interest can only be charged to consumers from 30 days after the due date. Furthermore, it is not possible to agree on interest rates other than the legal interest rate with consumers. The legal interest rate changes regularly, and it is therefore important to ensure that the correct interest rate is used in the calculation. According to section 5 of the Danish Interest Act, the interest rate is set at Danmarks Nationalbank's lending rate plus 8%. From January 1, 2023, the litigation interest rate is 9.90% p.a.
4. Agree an interest rate with your merchant buyers
If the debtor is a trader, you can claim interest on the amount due from the due date if this has been agreed, cf. section 3(1) of the Danish Interest Act. It is also possible to agree an interest rate other than the legal interest rate with commercial buyers. An interest rate and date in the invoice is not a sufficient contractual basis in this respect, as the invoice is a unilateral declaration by the seller. Instead, the interest rate and the date on which the interest will be charged must be agreed upon at the time the contract is concluded (e.g. it can be stated in the order confirmation, if one is used).
Also read these 3 great tips to keep costs down when collecting receivables.
If you have not agreed an interest rate and due date with the buyer, you can claim interest according to the same rules that apply to consumers.
If a commercial buyer is late with payment, the seller also has the option under section 9a(3) of the Interest Act to charge a fixed compensation amount to cover collection costs, which currently amounts to DKK 310.
5. Issue an order confirmation
When you receive an order from a customer, it is therefore a good idea to issue an order confirmation. The order confirmation gives the seller the opportunity to agree on delivery terms, payment terms and an interest rate other than the legal interest rate for commercial buyers. In other words, an order confirmation secures the seller's legal position, as the order confirmation forms the written basis for the actual purchase agreement that has been concluded and thus serves as proof of your agreement in the event of a legal dispute.
6. Consider using a debt collection agency
If you, as a seller, have problems with timely payment of invoices, you can make use of a debt collection agency. It is not a legal requirement to outsource your debt collection cases to another company, but it can ease the workload considerably to involve a professional who deals with debt collection on a daily basis. Even when collecting debts, it is important that the invoice meets the necessary legal requirements for invoices, as this can strengthen your case.
At CLEMENS, we have an experienced debt collection department that can help you with debt recovery.
If you do not yet have a streamlined debt collection procedure, or if you need guidance on debt collection procedures, you are always welcome to contact CLEMENS debt collection specialists.
