Denmark

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

Tax treaties entered 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
   
Tax Exchange Information Agreement (TEIA) 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

Individual Taxation

Resident individuals are taxed on their worldwide income; nonresidents are taxed only on Danish-source income.
An individual is resident if he/she has a permanent residence and a "qualifying" stay in Denmark, or spends more than six months in Denmark.
Taxable income comprises employment income, including employment benefits, income from self-employment, directors’ fees, interest income, dividends, etc. Income derived from self-employment can be taxed in the same way as income derived by a company.
Personal income burden is relatively high. Capital income up to DKK 40,800 for single taxpayers (DKK 81,600 for married couples) is taxed as capital income at a maximum tax rate of approximately 36.5%. Income exceeding DKK 40,800/DKK 81,600 is taxed at progressive rates up to 42%.
Taxable income is taxed at various progressive rates up to 55.6% (excluding the church tax). The income tax consists of the AM-tax of 8%, municipal tax, church tax and state tax. The AM-tax is calculated and deducted before calculating other taxes. The municipal taxes are determined by each county and range from 22.5% to 27.8% and the church tax, which is optional, ranges from 0.43% to 1.45%. The state tax consists of a bottom bracket tax of 6.83%, a health care tax of 5% and a top bracket tax of 15% for income exceeding DKK 449,100 (after deduction of the 8% AM-tax).
The tax year generally is the calendar year. The return must be filed by 1 May or 1 July of the year after the tax year. Additional reporting requirements apply for shares and foreign bank accounts.

Corporate Income Tax

Residents are taxed on a worldwide taxation, although profits and losses from foreign permanent establishments and real estate are exempt. Nonresidents are taxed on Danish-source income. Branches are taxed the same as subsidiaries.
Corporation tax is imposed on a company’s profits, which consist of business/trading income, passive income and capital gains. Normal business expenses may be deducted in computing taxable income.
Rate – 22%.

Capital Gains Tax

Capital gains normally are included in taxable income and are subject to the corporate tax rate of 24.5%. However, gains derived from subsidiary shares, group shares or unlisted portfolio shares generally are exempt (and losses are nondeductible).

Dividends

Dividends received by a Danish company on subsidiary shares and group shares generally are tax-exempt, whereas dividends on portfolio shares are subject to taxation.

Losses

Losses from previous years are fully deductible up to a taxable income that does not exceed a base amount of DKK 7.5 million (to be adjusted annually), with any remaining losses available to reduce remaining income by only 60%. The carryback of losses is not permitted.


Tax Year

The tax year is the calendar year, or another period if the taxpayer so elects. The tax year normally may not exceed 12 months.

Withholding Tax

Dividends: Dividends paid to a nonresident company are exempt from withholding tax if either of the following requirements is met:

  • The shares are “subsidiary shares”: No tax will be withheld if Danish taxation of the dividends should be reduced under the EU parent-subsidiary directive or a tax treaty.
  • The shares are “group shares”: No tax will be withheld if the shareholder is resident in the EU/EEA and Danish taxation of the dividends would have been reduced under the parent- subsidiary directive or a tax treaty, had the shares been subsidiary shares. Shares are subsidiary shares where the shareholder owns at least 10% of the share capital of the payer. Shares will qualify as group shares where the shareholder and the Danish company qualify for Danish cross-border tax consolidation, which usually requires that they are controlled by the same ultimate parent company holding more than 50% of the voting power. The rate is 15% where the recipient holds less than 10% of the company distributing the dividends and the tax authorities in the state where the recipient is resident are obliged to exchange information with the Danish tax authorities either under a tax treaty or other international treaty or convention, or according to an administrative assistance agreement in tax cases. The withholding tax rate on dividends paid to a nonresident in other cases is 27%.

Interest: Interest paid to a nonresident generally is exempt from withholding tax, although a 25% withholding tax applies to interest paid to foreign related entities in certain situations.
Royalties: Royalties paid to a nonresident are subject to a 25% withholding tax, unless the rate is reduced under a tax treaty or the EU interest and royalties directive applies.
Technical service fees: no
Branch remittance tax: no

VAT

VAT is imposed on the sale of most goods and the provision of most services.
Businesses registered for VAT can deduct the VAT on most purchases.
The standard VAT rate is 25%. The transport of persons, education, insurance business, financial activities and certain other services are exempt. If a business sells VAT- exempt services, it cannot deduct VAT on purchases related to such sales and the business may be liable to pay a tax on labor costs instead. The rate varies depending on the nature of the supply of services.

VAT Registration

The registration threshold for VAT purposes is EUR 6,720. Nonresidents that make taxable supplies of goods or certain services in Denmark are required to register; there is no threshold in such cases.

VAT Tax Period and Returns

Businesses are obliged to file VAT returns—and pay the VAT—on a monthly basis if the annual turnover exceeds EUR 6.7M; on a quarterly basis if the annual turnover is between EUR 0.67M and EUR 6.7M; and on a biannual basis if the turnover does not exceed EUR 0.67M. Newly registered businesses are liable to account for VAT quarterly unless their expected annual turnover exceeds EUR 7.4 million.

Stamp Duty

Registration of the transfer of certain assets is subject to stamp duty of 0.6%-1.5%, plus a fee of DKK 1,660.

Government Fee

There is no government fees applicable.

Other Taxes and Duties

Real property tax Some business property is subject to a building tax at a maximum of 1% of the building’s value.
Inheritance/estate tax Inheritance received by a spouse is not taxed. A 15% tax is imposed on inheritance by the closest family members (children, children-in-law, grandchildren and parents). Inheritance by others is subject to a 36.25% tax.
Social security contribution Individuals pay a monthly fixed contribution of DKK 90. The employer’s liability for social security contributions amounts to about DKK 10,000-DKK 12,000 per year per employee.

Anti-Avoidance Rules

Transfer pricing: The transfer pricing rules apply to transactions with affiliated companies. Controlled transactions are subject to the arm's length principle. Denmark generally follows the OECD transfer pricing guidelines. Transfer pricing documentation must be prepared. As from 1 January 2013, the Danish tax authorities can require certain businesses that are obliged to prepare transfer pricing documentation to obtain an assurance report from an independent auditor.
Thin capitalization: Interest deductions may be limited by three sets of rules: (1) the thin capitalization test imposes a debt-to-equity ratio of 4:1; (2) the asset test limits the deduction of interest expense to 3% of the tax basis in the assets; and (3) the EBIT test limits the deduction of interest expense to 80% of earnings before interest and tax.
Controlled foreign companies: The CFC rules apply where a Danish company controls, directly or indirectly, more than 50% of the voting power of another company (Danish or foreign), more than 50% of the income of the subsidiary is of a financial nature and more than 10% of the assets of the subsidiary are of a financial nature. In such a case, the entire income of the subsidiary is subject to taxation at the level of the Danish parent company, with a tax credit granted for tax paid by the subsidiary.
Other rules: Corporations that are treated as transparent entities for foreign tax purposes may be disregarded for Danish tax purposes. Danish branch offices and partnerships that are treated as corporations for foreign tax purposes also may be taxed as corporations for Danish tax purposes.
Disclosure requirements: Transfer pricing documentation must be prepared.

Double Tax Agreements

Denmark has exchange of information relationships with 124 jurisdictions through:
  • 72 DTC: zerbaijan, 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.
  • 52 TIEA: 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).

Foreign exchange control

There are no foreign exchange controls in Denmark.

ACCOUNTS

Accounts

All Danish companies are required to file annual financial statements with the Danish Commerce and Companies Agency (DCCA) which will be open to public. The statements must be audited by a state authorised public or a registered accountant. Exemption from audit is possible if the company does not exceed two of the following thresholds for at least two consecutive financial years:

  • A balance sheet total of DKK 4,000,000
  • A turnover of DKK 8,000,000
  • An average full time employees of 12

Annual Return

There is no statutory requirement to prepare and file annual return.

Tax Returns

The tax year is the calendar year, or another period if the taxpayer so elects. The tax year normally may not exceed 12 months.
The tax return must be filed within six months of the end of the fiscal year. For income years between 1 February and 31 March, the tax return must be filed by 1 August. Advance payments of tax generally must be made by 20 March and 20 November of the tax year.

    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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