Finance and agreements

Finance and agreements

This article aims to give you an overview and equip you to manage the finances of your artistic practice as a self-producing theatre artist.

Please note that the information on this page is for guidance only. We always recommend that you thoroughly familiarise yourself with the rules and the conditions that apply to your particular type of organisation.

VAT and SKAT

If you have an organisation that is registered for VAT, you must keep VAT accounts.

For most organisations, it pays to be VAT-registered, but you should be aware that you need to have sales with VAT to be eligible to offset purchase VAT.

It's smart to have an accounting programme that automatically accounts for VAT separately, so you can more easily submit your VAT return and keep accurate accounts for yourself, the Danish Agency for Culture and Palaces and any foundations.

There are a number of rules regarding which expenses you can and cannot deduct VAT on.

The following is a simplified overview, which is correct as of January 2022:

• You are not allowed to deduct VAT on passenger transport in e.g. a car with white plates, train, bus, etc. However, you can deduct VAT on expenses for e.g. petrol, workshop, etc. associated with the company's own car with yellow plates.
• For entertainment expenses, you can only deduct VAT on hotel and restaurant expenses (and not gifts or similar). Here you can get a full VAT deduction on hotel expenses and ¼ of the VAT on restaurant expenses. (Entertainment expenses are expenses incurred to close a deal, or to maintain or establish business relationships - for example, a meeting at a café with a theatre manager to whom you often sell your performances).
  • If you have hotel or restaurant expenses that are strictly business-related (e.g. in connection with a tour), it is not a hospitality expense, but you can still deduct the full VAT on the hotel expense and ¼ of the VAT on the restaurant expense.
  • If breakfast is provided at the hotel, this must be stated on the receipt so that it is possible to deduct the entire VAT from the overnight stay itself and only ¼ of the VAT from the breakfast. This also applies to e.g. board meetings, staff meetings or staff parties. However, a company can deduct the full VAT on meals and drinks for meetings with business associates on the company's own premises.

• VAT on gifts cannot be deducted. Neither can VAT on staff catering (including free coffee and tea for staff) in general.
• You cannot deduct VAT on goods purchased abroad. However, there are some rules about reporting VAT when purchasing goods and services abroad, which we recommend you familiarise yourself with if it is relevant to you.

Read more about VAT

Account plan

You need a chart of accounts to keep track of your accounts.

All accounting programmes are built around a chart of accounts.

The chart of accounts numbers the different types of expenses you have in your organisation.

The expenses are usually divided into different categories that correspond to the budget lines you have in your application budgets.

• Costumes, set design, props, lighting, sound, artist salaries, administration, passenger transport, shipping and more.

It's important that your chart of accounts is similar to your application budgets - this will make it easy for you to compare your accounting figures with your application budget when reporting on the funding you have received.

If you have different projects, some of the account names are repeated several times in your chart of accounts. Or you may have a code for each project.

For example, costumes can have both account no. 2000 during performance and account no. 2500 during tour. Or it could be called FOR 2000 and TOUR 2000. It depends on which accounting programme you use.

• It can be a good idea to separate different projects in your chart of accounts so that you can easily divide your accounting figures into the projects you have received funding for when reporting on the funding.
  
  
• If you give employees expenses, you can also ask them to post (write account numbers on) the receipts they submit themselves. Often there will be only a few numbers they need to use.

If you work with an accountant, the most economical/effective way to deliver the vouchers is for you or your employees to have posted the vouchers.

Salary/honourarium

You can either pay salary as A-income or B-income (fees).

If employees are permanent or long-term employees, they should be paid as A-income.

• This means that you need to create payslips where you have calculated tax, ATP and holiday pay, which you need to pay to the respective authorities, while you pay the net salary to the employee.
• The salary is calculated based on the salary agreed in the employment contract.
  
• You retrieve tax information on your employees from Skat (website) using the employee's social security number.
• The salary must be reported to Skat.
• If you pay salary as A-income, you should also be aware that you need to budget for a number of social security costs in addition to the salary. As an employer, you must pay 2/3 of the ATP costs, and as an employee, you must pay the social costs that follow the ATP rate.

Foreign employees

If you're going to have long-term foreign employees, they need to be aware that they need to register with Skat and have a social security number so you can pay out A-income.

This is fairly straightforward if they are EU citizens.

• If they are citizens of other countries, it's best if it's for a short enough time that they can be paid as an honorarium. It's also difficult and time-consuming to get a work permit.
  
  
• Alternatively, if they are registered as self-employed in their home country or work through a company in their home country, they may be able to get paid by invoice.

Attachments

A voucher is documentation for an income or expense in your accounts.
You must have supporting documentation in the form of vouchers for all expenses and income.
Supporting documents can be invoices, payslips, bills from authorities, diet slips, invoices you have sent to customers, shop receipts, train tickets, plane tickets, fixed rent transfers that refer to a rental contract, etc.

These are the vouchers you need to post to the bookkeeper (or yourself).

There is a new bookkeeping law on the way, one of the elements of which is that it will be mandatory to store your bookkeeping materials (including vouchers) digitally. This can either be done through an approved bookkeeping system or you can create your own solution - however, there are a number of requirements to fulfil if you choose to create your own solution. Therefore, for many, it will be easiest to use an approved accounting system (updated April 2022).

Budget

Your budget is your plan for how you will spend the money you have for your project.

Often you'll have both an initial application budget (which you used to raise funds for the project) and a working budget, which you can change as you learn more about how much money you have available and how to spend it.

The budget and bookkeeping is your overall management tool for your finances.

If you work with an accountant, you will receive balance sheets where you can see what money has come in and what money has been spent.
The balance sheet will be sent to you in an Excel file so you can compare the figures with your budget.

You can also choose to have the budget loaded into the bookkeeper's accounts. However, as you will often need to change the budget on an ongoing basis, this is rarely a good idea.

Revision

The auditor must have an account from you where the bank and cash are reconciled.

Payroll tax returns, tax payments, VAT, AMB, ATP, holiday pay and other costs due must also be reconciled.

Receivables must also be reconciled.

The auditor must have the grant letter(s), application budget and a report explaining (major) deviations from the budget.

The fewer errors and the more control you have over submitting everything, the cheaper the revision.

Grants and reporting

You can read more about the Danish Arts Foundation's requirements for reporting, accounting and auditing here

Contacts

On the Danish Theatre website you can read the current collective agreements and download standard contracts that comply with the collective agreements.

You can find standard contracts for touring in Denmark on the website of the Danish Theatre Association. You need to refer to them if you want to tour in Denmark.