Denmark

2012 Tax rates of Denmark

Corporate tax

Rate

The corporate tax rate of Denmark is 25%. Tax is based on worldwide operations, but profits and losses from permanent establishments abroad and real estate are exempt. Company profits consists of business and trading income, passive income as well as capital gains. Certain business expenses may be deducted in computing taxable income.

Taxation of dividends

Portfolio share dividends are subject to taxation. Danish company dividends and subsidiary shares dividends are tax exempt. If a shareholder owns at least 10% directly of nominal share company capital; the shares are labeled as subsidiary. If the shareholder and the Danish company qualify for cross-border tax consolidation shares will qualify as group shares.

Capital gains

Capital gains are added to taxable income and thus subject to the same tax rate (25%). The exceptions are subsidiary share profits and group share profits, which are exempt.

Losses

Losses can be carried forward indefinitely. Losses cannot be carried backwards.

Withholding tax

Dividend paid to nonresidents are witholding tax-exempt if the shares are subisidary shares or group shares.

The rate is 15% if recipients hold less than 10% of the dividend distributing company, provided that the tax authorities of the recipient`s state exchange information according to a tax treaty, international treaty or convention. The withholding dividends tax rate paid to a non-resident under other circumstances is 27%.

In general there is no taxation levied on interest, except interests paid to to foreign related entities are taxed at 25% under certain circumstances.

Royalties to non-residents corporations are subject to a 25% withholding tax. The rate can be reduced under the EU interest and royalty directive or if there is a tax treaty in effect.

Real property tax

Property value tax is 1% on real estate up to DKK 3 040 000 and 3% on values exceeding that level.

Stamp Duty

Some specific assets are subject to stamp tax of between 0,1% and 1,5% and a fee of DKK 1 400.

 

Individual tax

General

Resident individuals are taxed on their worldwide income. Nonresidents are just taxed on their income from Danish-sourced work. If an individual spends more than 6 months per year in Denmark or is otherwise considered to be a “qualified stayer” of Denmark that individual is deemed as resident.

Taxable income

Taxable income for an individual is considered to conclude among other items; employment, interest income, self-employment. Income coming from self-employment may be taxed in similar fashion as income coming from a company.

Single taxpayer income under DKK 40.000 and married couple income under DKK 80.000 is taxed as capital income at 36,5%. Income above those threesholds are taxe at a progressive rate all the way up to 45,5%.

Rates

Progressive rates up to a maximum of 56% apply on all income. The income tax is made up of state tax, municipal tax, church tax and the AM-tax (formerly a social security contribution) which is 8%. The AM-tax is deducted before any further tax calculations are done. The municipality taxes vary depending on county and they typically range between 22,8% and 27,8%.

The church tax is optional. If church tax is in effect it typically ranges between 0,44% and 1,5%. The state tax is made up of a bottom bracket tax (3,64%), a health care tax (8%), and a 15% top bracket tax for any income above DKK 389.900.

A tax scheme of 26% is available for individuals that are either scientists or meet specific qualifications of high salary.

Capital Gains

Capital gains on shares are taxed progressively as share income. Up to DKK 48.300 27% applies. Above that threeshold 42% applies.

Deductions

An allowance of DKK 42.900 is available for all citizens. On top of this an employment allowance is possible for most taxpayers. Possible deductions are among other things interest expenses, child maintenance, pension contributions (up to DKK 100.000 annually), unemployment fund fees, work-related transport and trade union fees (up to DKK 3.000 annually).

Real Estate

The property value tax is 1% on real estate up to DKK 3 040 000 and 3% of any amount exceeding that threeshold. A stamp duty of between 0,6% and 1,5% applies. On top of this a set fee of DKK 1 400 applies.

Inheritance Tax

Inheritance from a spouse is not subject to any tax. Inheritence by close family member such as children, children in law, parents and grandchildren are taxed at 15%. Inheritence by other are taxed at 36,25%.

Social Security

A monthly fee of DKK 90 is payed by tax individuals. The social security contribution is a tax (AM-tax).

VAT

VAT applies to the majority of sales of goods and services. The standard VAT rate is 25%. VAT registered businesses are allowed to deduct VAT on purchases. Personal transports, insurance business, education, financial services and some other services are VAT exempt.

 

Other

Tax year. Calendar year. A company may chose another period as tax year.

Tax treaties. Denmark currently has 60 treaties.

Filing requirements. For individuals the tax return is to be filed by 1 May or 1 July the year after the tax year in question.

Registration (for VAT purpose). Registration for VAT purposes has a threeshold of EUR 6 720. Nonresidents making taxable goods or services supplies in Denmark must register regardless of the size of  their total sales.

 

Links

Tax authorities. SKAT

Consulate

Local Tax Resources

Chamber of commerce

(Online realtor/stock exchange)