Expatriate tax ebook - Denmark

What Taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes

Capital gains tax
See "Investment income"

Inheritance, estate & gift taxes
Denmark taxes gifts at 15% or 36.25 % subject to a range of exemptions. Inheritance tax is between 15% and 36.25%, depending on the family relationships between the parties.

Gifts under DKK 56.800 between parents and children are tax free.

Expatriates resident and working in Denmark should seek advice before making any gifts over DKK 56,800.

There are limited agreements for avoiding a double charge to inheritance taxes. These are restricted to other Scandinavian countries and also the US, Germany, Switzerland and Italy.

Investment income
Tax on savings and capital gains (excluding dividends and some gains on stocks)
Interest, capital gains etc. are taxed precisely as other taxable income. Negative capital income (i.e. interest to be paid) is only deductible in the income which is subject to municipal and county tax and not deductible in the income subject to state tax. The average value of the deduction is 33.7 including church tax.

Tax on dividends and some gains on shares
In 2008 dividends and gains on sale of shares are taxed at 28% as long as the amount is less than DKK 46,700. The tax rate is 43% on the amount between DKK 46,700 and DKK 102,600. For dividends and gains above DKK 102,600 the rate is 45% .

If the shareholder owns listed shares bought before 1 January 2006, and the total holding of these shares on this date does not exceed a value of DKK 136,600 any gain will be tax free if sold after three years’ of ownership.

Local taxes
The tax rates are a combination of state taxes and local commune taxes. The local taxes differ a little bit but the average rate in 2008 is 33.7%, including a health contribution.

Real estate tax
Real estate is taxed when used as a residence. The rates are 1% of the value up to DKK 3,040.000 and 3% for values over this amount. The value is based on a public evaluation. The rates are limited by some more complicated rules.

This real estate tax is not included as part of the regular income tax, and a loss in your business cannot be deducted in the real estate tax.

Social security taxes - 2008
In general, the employer does not contribute to social security directly.

The employee pays 8% of their gross cash salary and business income in Arbejdsmarkedsbidrag (social security tax). There is no allowance.

In addition to the 8 % of the gross salary, a small contribution must be made to ATP (Arbejdsmarkedets Tillægspension). The employee pays a contribution of approx. DKK 81 a month and in addition, the employer pays DKK 163 per month.

Car benefits and the value of free telephone are subject to social security tax, however, in general, tax benefits are not subject to social security tax.

The employer is liable to pay a quarterly contribution to AER (labour market apprentice fund) of DKK 1,620 per year for each employee. Finally, the employer is liable to take out compulsory industrial injury insurance.
Taxable income is computed as gross income less social contributions of 8%.

Stock options
Under certain conditions, it is possible to gain an advantage in the form of deferral of the tax charge to the point of exercise. Tax is due at up to the highest rate of income tax (59%) and social security is also due at 8%.
If you meet other conditions there will be no taxation on the options. The shares acquired will be taxed as regular shares. See the 'investment income' section above.

Wealth tax
There are no wealth taxes in Denmark, except for real estate.

Other specific taxes
There are no other specific taxes in Denmark.

Information about Denmark:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities