Social security contributions
The Danish social security system is financed primarily through ordinary tax revenue and only very limited social security contributions for employees and employers.
All individuals working in Denmark and fully tax liable to Denmark and who are covered by Danish social security must also pay labour market supplementary pension (ATP).
Danish social security contributions and in some cases foreign social security contributions are deductible from personal income for tax purposes. The employer is responsible for withholding and paying the contributions on behalf of their employees.
|Social security annual rates (2023)||DKK|
|Contribution to maternity fund, estimated||1,350|
|Industrial injuries insurance, estimated *||5,000|
|Other public social security schemes, partly estimated||5,300|
* Please be informed that the estimated industrial injuries insurance may vary, depending on the field of work that the insured employee is employed within, the number of employees that the employer intends to insure, the specific insurance company, etc.
Value-added tax (VAT)
The Danish VAT rate is 25%.
Net wealth/worth taxes
From 1997, the wealth tax has been abolished. However, individuals must still fill out asset declarations as to foreign pension schemes and certain investments.
Inheritance, estate, and gift taxes
Inheritance left by a Danish resident is, in general, subject to Danish estate tax regardless of the country of residence of the beneficiary. Inheritance received by a Danish resident from an individual who was not resident in Denmark prior to death is not subject to Danish estate tax except if the inheritance consists of property located in Denmark or of assets related to a PE in Denmark. However, if an estate is settled before a Danish court, the entire inheritance will become taxable in Denmark, regardless of the country of residence of the deceased and the heirs. Estate tax amounts to 15% and is levied on the part of the assets that falls to the deceased’s children and descendants, stepchildren and their descendants, parents, or cohabitant during the last two years of one’s life. Inheritance and insurance payments that fall to the deceased’s spouse are exempt from estate tax. Inheritance received by any other relatives than the above-mentioned is subject to a supplementary estate tax of 25% of the value of the asset after deduction of the first 15%. The taxes are not levied on the first DKK 321,700 (in 2023) of the estate.
Gifts and donations not exceeding DKK 71,500 (in 2023) to the donor’s descendants are tax exempt. Gifts to the descendant’s spouses may not exceed DKK 25,000 (in 2023) to be tax exempt. Gifts and donations to the donor’s offspring and their descendants in excess of DKK 71,500 are levied with a gift tax amounting to 15%, and gifts to the donor’s stepparents and grand stepparents are levied with a gift tax of 36.25%. Gifts or inheritance between unrelated individuals are taxable as ordinary income if the recipient is fully tax liable to Denmark. A gift is not deductible for the donor.
Property value tax
Property owners are obligated to pay property value tax. Property value tax annually amounts to 0.92% of the value of a property up to DKK 3,040,000 and 3% of the value exceeding DKK 3,040,000. However, if the property was purchased no later than 1 July 1998, a deduction is granted.
Property value tax is charged on both Danish properties and properties situated in another country. Properties that are rented out are not subject to property value tax, regardless of where the property is situated. Instead, the net profit from the rental business is taxable.
Property and land taxes
Property owners are also liable to pay property and land taxes to the municipality where the property is situated. The property and land tax is calculated on the basis of the land value and is settled by the municipal council. The tax is collected in each municipality.
Luxury and excise taxes
In Denmark, numerous excise taxes and duties apply on goods (e.g. light balls, sugar, liquor, tobacco). The taxes/duties are indirectly paid by the consumer through the prices of the goods and are thereby withheld and paid to the authorities by the entity selling the goods. A number of these taxes are expected to be reduced or abolished in the coming years.
In general, stamp duty primarily occurs in connection with registration of rights regarding property and land.
Furthermore, insurance documents are liable to stamp duty if the risk is situated in Denmark.
Taxes/duties regarding cars
When a motor vehicle is registered in Denmark for the first time, a registration duty must be paid. The motor vehicle cannot get a license plate before the duty has been paid.
The rates in 2023 for passenger cars are 25% of the value up to DKK 67,800, 85% of the value from DKK 67,800 up to DKK 210,600, and 150% of the value in excess.
If the stay in Denmark is anticipated to be temporary, other rules may be applied.
There is also an environmental addition to the taxable value of company cars. The addition consists of the annual motor vehicle tax, which is a quarterly fixed tax to be paid on all cars. The environmental addition provides a further incentive for the employee to choose a fuel-efficient company car, as the motor vehicle tax is based on the car’s fuel consumption.
Goods for private use can be imported duty-free to Denmark from another European Union (EU) country. Denmark complies with the EU guidelines regarding the amounts of cigarettes, liquor, wine, and beer to be looked upon as serving private use.
Furthermore, import of personal possessions when arriving from a non-EU country may be exempted from customs duties, excises, and VAT, provided a number of conditions are fulfilled.
According to the rules in the Danish Customs Act, an individual is obligated to inform the tax authorities if Denmark is entered or left with cash amounts, traveller’s cheques, or the like with a value exceeding 10,000 euros (EUR).
The Danish tax authorities must also be notified of foreign bank accounts and deposits. Information on foreign life, pension schemes, and investments must also be submitted. Special forms must be filed.
Tax regarding growth of a pension scheme (PAL tax)
In Denmark, individuals are taxed of the growth of their pension schemes. The tax rate is fixed at 15.3%. It is possible for individuals moving abroad to apply for exemption from this tax.
PAL tax is collected by the insurance company or pension fund, etc. that is obligated to withhold and pay the tax on behalf of the owner of the plan.
Exit taxation applies for individuals who have been considered as resident and tax treaty resident in Denmark, who are leaving Denmark with assets, including but not limited to shares, options, bonds, certain pension plans, certain property investments, etc.
In case an individual's ties to another country during one's time in Denmark has been to a country with which Denmark does not have a DTT, then the exit tax rules may apply if the individual has been considered resident in Denmark according to internal Danish rules.
Specific exit tax rules apply for each type of asset. However, exit tax for individuals leaving with shares, bonds, claims, and financial contracts only applies if the individual has been subject to full Danish taxation (resident or resident and tax treaty resident) for at least seven out of the past ten years at the date of departure (date on which resident taxation ceases).
The rules apply to both Danish and foreign assets, shares, investment funds, financial contracts, deposit accounts, etc.
If comprised by the exit tax rules, the assets, etc. comprised will be considered as realised on the date of departure, and the individual will be liable to pay the Danish tax due on this unrealised gain (this is so-called exit tax, 'fraflytterskat' in Danish). It may be possible to file for postponement of payment of the exit tax, provided a number of conditions are met and recurring obligations fulfilled. The possible postponement agreement will be different depending on the assets/investment type in question.