Last modified: 29/04/2024 09:44

Corporate taxation

	Rate
Corporate income tax rate	22
Branch tax rate	22
Capital gains tax rate	22

Residence: A company is resident in Denmark if its incorporated in Denmark or the center of management is situated in Denmark. If a foreign company has a permanent establishment or a property in Denmark, this is also applicated to pay corporate taxes.

Basis: Joint taxation of all Danish subsidiaries and Danish permanent establishments is compulsory. Foreign subsidiaries may be taxed jointly with Danish companies. This is an option, but if international joint taxation is elected, all foreign and Danish companies, permanent establishments, and real estate must be included in the joint taxation. This also applies to foreign parent companies and sister companies. Generally, the election will be binding for a period of ten years.

Taxable income: The companies global income is taxable with tax relief for eligible foreign-source income.

Significant local taxes on income: There are no significant and general local taxes in Denmark, except on properties.

Alternative minimum tax: Not applicable.

Taxation of dividends: Taxation of dividends depends on whether the shares are considered as shares of a subsidiary or group company shares. Subsidiary shares are defined as: • The company owns 10% or more of the subsidiary company • The subsidiary company is located in a country within the EU or a country with a double taxation treaty with Denmark where the taxation has to be waived or reduced. Group company shares are defined as: • The company has the deciding control of the subsidiary company – normally when having the voting majority. Dividends from a subsidiary or a group company to a Danish parent company are tax‐exempted.

Capital gains: Gains received from unlisted shares in companies within EU/countries with a double taxation treaty with Denmark are as a main rule tax-exempt. Losses are not deductible.

Losses: Tax losses may be carried forward for an indefinite period. Various limitations apply to this rule as regards change of ownership. Restrictions apply in the way that only losses up to DKK 9.457 (2024) million may be used 100% in a single year. Taxable income above this limit can only be reduced with 60% be using remaining tax losses. An eventual remaining tax loss can be carried forward to be used in later years’ positive income.

Foreign tax relief: Foreign-source income is generally taxable subject to a credit for the tax paid either according to a tax treaty or internal legislation

Participation exemption: Yes, see above.

Holding-company regime: Yes, most business in Denmark has a holding structure.

Tax-based incentives: There is a scheme for refund of tax for certain approved R&D projects. The conditions for coming under the scheme are extensive and restrictive. The tax value of losses, which comes from research and development costs, may be refunded by the tax authorities. For the tax year 2024 companies can get the tax value of deficit / development costs of up to 25 million DKK (the tax value is up to 5.5 million.).

Group relief/fiscal unity: National joint taxation is mandatory and there is a consolidated filing demand for the jointly taxed companies.

Small company/alternative tax regimes: Not applicable.

Corporate taxation: compliance

Tax year: Optional. A company can choose an income year other than the calendar year.

Consolidated returns: Joint taxation of all Danish subsidiaries and Danish permanent establishments is compulsory. Jointly taxed companies are taxed on the joint taxable income. The Danish tax authorities have at least 3 years to tax/audit the company.

Filing and payment: The deadline for reporting the information form is, as a general rule, 6 months after the end of the income year. The ordinary advance tax is paid twice a year in equal installments, in March and November. Companies have the option of making a voluntary payment together with advance tax rates, and also have the option of making a voluntary payment no later than 1 February. Interest is added to the payments and on underpayment of tax/surplus tax. The interest rates are changed every year and the rate also depends on when the tax payments are made.

Penalties: Denmark has various penalties (fines as well as tax increases) in case of non-compliance with corporate tax formalities.

Rulings: Denmark has a very active upfront tax ruling practice.

Taxation of individuals

Taxable income (EUR)	Rate
Personal allowance – 6.671	0
Personal income after labour market contribution up to – 79.046	App. 36-37%
Personal income after labour market contribution avobe – 79.046	App. 51-52%

Taxable income is computed on the basis of:

1. Earned income
2. Unearned income
3. Deductible expenses.

The taxable/deductible values for these three categories vary. The tax rates depends on where you live in Denmark.

1. Earned income comprises wages and salaries, less any labour market contribution and income from personally owned entities and commercial buildings etc
2. Unearned income is principally interest, both earned and paid, and other capital income.
3. Deductible expenses are primarily contributions to unemployment insurance funds and trade unions, transport allowances, employment deductions and alimony.

There is an upper limit on the total income tax percentage. The tax ceiling (excluding labour market contribution on 8%) is 52.09%.

Expatriate Tax Scheme

Foreign employees assigned to work in Denmark may be liable to special taxation of 27% for seven years of their gross income without any deductions.

The income will furthermore be subject to payment of a labour market contribution (8%).

The monthly income including certain benefits must be a minimum of DKK 75.100 (2024) before labour market contributions.

Example:
Income per month	DKK 100,000
Labour market contributions, 8% =	DKK 8,000
Taxable income =	DKK 92,000
27% tax =	DKK 24,840
Net pay =	DKK 67,160

Residence: The rules for full tax liability are extremely complicated in Denmark. The main rules are however the following: You are fully liable for tax in Denmark if you are resident in Denmark or stay for a continuous period of at least 6 months. For foreigners etc. who move to Denmark, the full tax liability comes into effect if the person stays in the place of residence, either for a continuous stay of 3 months or 180 days within 12 months. As a general rule, working stays are not permitted.

Basis: Resident individuals are taxed on their worldwide income. Non-residents are taxed of certain Danish income.

Taxable income: Are as a main rule all income is taxable. Differentiated tax rates apply according to the type of income.

Capital gains: Capital gains are as a main rule taxable. Differentiated tax rates apply according to the type of income.

Deductions and allowances: Deductible expenses are primarily contributions to unemployment insurance funds and trade unions, transport allowances, employment deductions and alimony. Private pension contributions may also be deducted.

Foreign tax relief: Foreign-source income is generally taxable subject to a credit for the tax paid either according to a tax treaty or local Danish legislation.

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Taxation of individuals: compliance

Tax year: The tax year for personal income tax purposes runs as a general from 1 January to 31 December.

Filing and payment: A tax return has to be filed no later than 1. May or 1. July after end of the calender year. The deadline depends on which types of income / complicity of the persons siuation. If you for instance have a personale business or foreign income the deadline is 1. July. There is a preliminary tax payment during the year, and withholding taxes apply. Remaining tax needs to be paid in 3 installments, unless it is less than a app. 3.000 EUR. Under that amount the tax will be included in next years tax instead. Interest will be added on remaining tax.

Penalties: Denmark has various penalties (fines as well as tax increases) in case of non-compliance with personal tax formalities.

Rulings: Denmark has a very active upfront tax ruling practice.

Withholding taxes

Type of Payment	Resident recipients		Non-residents recipients
	Company	Individual	Company	Individual
	Rate (%)	Rate (%)	Rate (%)	Rate (%)
Dividends	0-22%	27%	0-44%	0-44%
Interest	0	0	0-22%	0
Royalties	0	0	0-22%	0-22%

The withholding tax depends on the type of income, recipient and recipient’s place of residence, including any double taxation agreement. As a general rule, a reduced withholding tax or a tax refund must be applied for. Denmark has complicated rules, and a general anti tax avoidance rule. They also look at the so-called beneficial owner.

Branch remittance tax: Not applicable.

Anti-avoidance legislation

Transfer pricing: All transactions with group companies must be conducted on an arm’s length basis. This means that intercompany prices must be set as if the parties involved were genuine independent third party companies, taking into account the normal market prices for similar transactions in identical or similar circumstances. A company must prepare transfer pricing documentation in Denmark if there are 250 or more employees, or if the turnover exceeds DKK 250 million and the balance sheet total exceeds DKK 125 million. The limit values are measured at group level. The written transfer pricing documentation must be prepared continuously and submitted no later than 60 days after the deadline for submitting the information form.

Interest restriction: Interest restriction: At arm’s length interest expenses are fully tax-deductible. However, Denmark tax law provides for 3 specific thin capitalization rules: Number 1 – 4:1 debt-equity ratio rule: Specific provisions apply to restrictions of deductibility for interest expenses and capital losses regarding thin capitalisation, which occurs when the financing of a company controlled by a Danish or foreign entity principally consists of interest-bearing loans from this entity. Included in controlled debt is also debt to a third party, where security is provided by a group entity. The deductibility restriction does not apply if the controlled debt does not exceed DKK 10 million, or if the lending company can document that similar financing can be obtained from an independent lender. Number 2 – standard interest rules: According to the standard interest rules, a maximum interest calculated on the basis of the company’s tax assets can be deducted. However, interest of DKK 21,300,000 can always be deducted. Number 3 – EBITDA rule: According to the EBITDA rule, the taxable income before depreciation can be reduced by a maximum of 30 per cent. as a result of interest expenses. However, interest of DKK 22,313,400 can always be deducted.

Controlled foreign companies: According to controlled foreign company (CFC) taxation, Danish companies that hold a controlling interest (deciding influence/majority of votes) in financial companies are forced to jointly tax with the foreign financial company for Danish tax purposes.

Hybrid mismatches: Hybrid mismatch rules apply in Denmark.

Disclosure requirements: DAC 6 and DAC 7 rules apply in Denmark.

Exit taxes: Exit taxes apply in Denmark.

General anti-avoidance rule: A general anti-avoidance rule apply.

Digital services tax and Other significant anti-avoidance legislation: Danish tax legislation does not yet comprise a digital services tax.

Value-added tax/Goods and services tax

Type of tax: VAT Various duties apply for certain types of product and services. Please contact us us for more information.

Standard rate: 25%

Reduced rates: None, but not all goods and services in Denmark are subject to VAT. The following services are VAT exempt: medical services, services provided by educational institutions, most banking services, insurance transactions, services performed by sports organizations and property rentals, passenger transportation. Companies that provide exempted services are not entitled to charge VAT for their services. In addition, they are also not entitled to claim or deduct the VAT charged to them for goods and services. Companies that perform both VAT liable and VAT exempt activities will assign VAT to those specific services on which VAT is due.

Registration: The Danish value added tax system is based on the European Directive concerning tax on added value. The registration obligation for VAT arises when sales within a continuous 12 months period exceed DKK 50,000.

Filing and payment: VAT is settled on a monthly, quarterly or half year basis, depending on the size of the turnover. Reporting and payment is made to the tax authorities. All reporting is done digitally. Newly registered companies will, as a mail rule, report VAT on a quarterly basis.

Social security contributions

Just like in other countries, Danish employers also have to pay contributions to a number of social security schemes for their employees. Seen from an international perspective, however, the contributions are relatively modest.

Danish employers are subject to seven types of sociale contributions, but which “only” amount to EUR 1,500-2,000 per employee.

Self-employed

Self-employed persons must also pay certain of the social contributions

Other taxes

Capital duty: Capital duties / registration duties are indirect taxes and are therefore applied on a transaction basis, and need to be paid on for instance loans and property purchases.

Immovable property taxes: Owners of real estate located in Denmark pay real estate taxes.

Transfer tax: Stamp tax is payable on a few documents, such as a deed of transfer of real estate (DKK 1,660 plus 0.6% of the transfer sum). There is no stamp duty on transfer of shares.

Stamp duty: Stamp tax is payable on a few documents, such as a deed of transfer of real estate (DKK 1,660 plus 0.6% of the transfer sum). There is no stamp duty on transfer of shares.

Net wealth/worth tax: None

Inheritance/gift taxes: Denmark has both inheritance/gift taxes. The normal tax rate is 15% but depends on the person’s family situation.

Other: N/A

Tax treaties

Denmark has tax treaties with many countries.