Denmark tax system: audit, reporting and optimization of taxation of Danish companies and individuals: VAT, income tax and capital gains

Basic taxes (briefly)

Personal tax ~36-51%
Corporate tax (in detail) Income tax is paid at a rate of 22%. Some industries apply different rates.
Capital gains tax. Details Capital gains are included in the total tax base.
VAT. Details The standard VAT rate is 25%.
Other taxes real property tax, inheritance tax, social security contribution
Government fee
Stamp duty 0.6%

International tax agreement

Azerbaijan, Argentina, Armenia, Australia, Austria, Bangladesh, Belarus, Belgium, Brazil, Bulgaria, Canada, Chile, China, Chinese Taipei, Croatia, Cyprus, Czech Republic, Egypt, Estonia, Former Yugoslav Republic of Macedonia, Georgia, Germany, Ghana, Greece, Hungary, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kenya, Korea (Republic of), Kuwait, Kyrgyzstan, Latvia, Lithuania, Malaysia, Malta, Mexico, Montenegro, Morocco, Netherlands, New Zealand, Pakistan, Philippines, Poland, Portugal, Romania, Russian Federation, Serbia, Singapore, Slovakia, Slovenia, South Africa, Sri Lanka, Switzerland, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Kingdom, United States, Venezuela, Viet nam, Zambia
   
Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda, Botswana, Brunei Darussalam, Cayman Islands, Cook Islands, Costa Rica, Curaçao, Dominica, Faroe Islands, Finland, Gibraltar, Greenland, Grenada, Guatemala, Guernsey, Hong Kong, Iceland, Isle of Man, Jamaica, Jersey, Liberia, Liechtenstein, Luxembourg, Macao (China), Marshall Islands, Mauritius, Monaco, Montserrat, Niue, Norway, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Seychelles, Sint Maarten, Spain, Sweden, Turks and Caicos Islands, Uruguay, Vanuatu, Virgin Islands (British)


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Taxation of individuals

Residents pay income tax on worldwide income, and non-residents on income from sources in Denmark.

Income of individuals is taxed at the level of the country, municipalities, tax to maintain employment, church tax (for members of the Danish Lutheran Church).

The tax rates are:

Country-level income tax:

  • 12,11% from - income up to 544,800 DKK;
  • 15% from income over 544,800 DKK.

Municipal tax at an average rate of about 25%.

Tax to maintain employment at a rate of 8%.

Tax on dividend income and gains from the sale of shares is charged at a rate of 27% on income up to 56 500 DKK and 42% on income above this threshold.

There are special tax regimes, particularly for foreign workers and scientists.

Income tax

Danish companies pay income tax on worldwide income, but profits of foreign permanent establishments and income from overseas property are not subject to income tax in Denmark.

Non-resident companies pay income tax on income from sources in Denmark.

Income tax is paid at a rate of 22%. In some industries other rates apply.

Capital gains are included in the total tax base.

Profits from the sale of shares and dividends are not taxed under certain conditions. For example, profit tax is not paid if the share of participation in a foreign company is at least 10%, such foreign company pays profit tax in its country of residence, and there is an agreement on exchange of tax information with that country.

Social contributions

Social contributions are not set as a percentage of labor remuneration, but as a certain amount in crowns.

The basic contributions include:

From the employee: Pension contribution (ATP) of about 150 EUR per year.

From the employer:

  • Pension contribution (ATP) of about 300 EUR per year;
  • Maternity fund, about 150 EUR per year;
  • Work injury insurance, on average about 670 EUR per year;
  • Other social contributions, estimated about 700 EUR per year.

Employers also pay some other fees.

VAT

VAT is levied at a rate of 25%.

There are non-taxable supplies.

Withholding tax

In general, the withholding tax rate on dividends is 22%, in some cases 15% (27% is withheld and the difference can be refunded).

The 22% tax is withheld when interest is paid. However (with some exceptions) tax may not apply if the creditor is in the EU or in a country with a double taxation treaty with Denmark.

With regard to royalties tax is withheld at a rate of 22%.

Tax may be withheld on certain other payments of income.

Withholding tax may be reduced by double taxation treaty or EU directives.

Property tax

Owners of non-residential property pay land tax at rates set by the municipalities ranging from 1.6% to 3.4%. Municipalities may also levy a tax on certain non-residential properties at a rate of up to 1% of the property value minus the land value.

Stamp Duty

Stamp duty is payable on certain documents. In real estate transactions, in particular, stamp duty is charged at 0.6% plus 1,660 DKK.

No stamp duty is payable on transfers of shares.

Inheritance and gift tax

The inheritance tax rate is 15% for immediate relatives and an additional tax is levied on inheritances by more distant relatives. A surviving spouse is not taxed. There is a nontaxable minimum.

Gifts minus the nontaxable threshold are taxed at a 15% rate for gifts between immediate relatives and a higher rate for gifts to certain other relatives. Gifts between non-relatives are subject to income tax.

CFC rules

A foreign company is considered to be a controlled company if:

the Danish company directly or indirectly, alone or jointly with related parties, owns more than 50% of the capital or voting rights in the company, more than half of the company's taxable income is represented by income such as interest, royalties, capital gains, etc.,more than 10% of the company's assets are assets generating these types of income.

CFC rules are in the process of revision.

Double taxation treaties

Denmark has entered into the following tax information exchange mechanisms:

72 DTCs: Azerbaijan, Argentina, Armenia, Australia, Austria, Bangladesh, Belarus, Belgium, Brazil, Bulgaria, Canada, Chile, China, Chinese Taipei, Croatia, Cyprus, Czech Republic, Egypt, Estonia, Former Yugoslav Republic of Macedonia, Georgia, Germany, Ghana, Greece, Hungary, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kenya, Korea (Republic of), Kuwait, Kyrgyzstan, Latvia, Lithuania, Malaysia, Malta, Mexico, Montenegro, Morocco, Netherlands, New Zealand, Pakistan, Philippines, Poland, Portugal, Romania, Russian Federation, Serbia, Singapore, Slovakia, Slovenia, South Africa, Sri Lanka, Switzerland, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Kingdom, United States, Venezuela, Viet Nam, Zambia.

53 TIEAs: Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda, Botswana, Brunei Darussalam, Cayman Islands, Cook Islands, Costa Rica, Curaçao, Dominica, Faroe Islands, Finland, Gibraltar, Greenland, Grenada, Guatemala, Guernsey, Hong Kong, Iceland, Isle of Man, Jamaica, Jersey, Liberia, Liechtenstein, Luxembourg, Macao (China), Marshall Islands, Mauritius, Monaco, Montserrat, Niue, Norway, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Seychelles, Sint Maarten, Spain, Sweden, Turks and Caicos Islands, Uruguay, Vanuatu, Virgin Islands (British).

Exchange control

In Denmark, there are no currency controls.

    Taxes of Denmark

    Min. rate for corporate tax 22%
    Capital gains tax Regular rate
    VAT 25%
    Withholding tax 22%/22%/22%
    Exchange control No
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