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 by 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 below DKK 58,700 between parents and children are tax-free.

Expatriates resident and working in Denmark should seek advice before making any gifts above DKK 58,700.

There are a limited number of agreements for avoiding a double charge to inheritance taxes. These are restricted to other Scandinavian countries (Finland, Norway and Sweden) and the US, Germany, Switzerland and Italy.

Investment income
Tax on savings and capital gains

Interest, capital gains (excluding dividends and some gains on shares) etc. are taxed precisely as other taxable income. Negative capital income (i.e. interest to be paid) is only deductible with the average value of 33,5 %.

Tax on dividends and some gains on shares

In 2010 dividends and gains on sale of shares are taxed at 28 % as long as the amount is less than DKK 48,300. For dividends and gains above DKK 48,300 the rate is 42 %.

If the shareholder owns listed shares bought before 1 January 2006, and the total holding of these shares on this date did not exceed a value of DKK 136,600, any gain will be tax free.

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 2010 is 32.9%, 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
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 (labour market supplementary pension scheme - Arbejdsmarkedets Tillægspension). The employee pays a contribution of approx. DKK 90 a month and in addition, the employer pays DKK 180 per month.

Car benefits and the value of free multimedia (telephone, PC and internet access) are subject to social security contribution. However, tax benefits are not subject to social security tax.

Employers are liable to pay a quarterly contribution to AER - the Employers’ Reimbursement System (Arbejdsgivernes Elevrefusion) of approx. DKK 532  for each employee. Finally, employers are liable to take out compulsory industrial injury insurance.

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 (51.5 %).

If certain other conditions are met, options will not be taxed. 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