The Danish tax year runs from 1 January to 31 December.
Provisional taxes are withheld or collected on the basis of an estimated income for the current year. Accordingly, a preliminary tax return must be filed with the Danish tax authorities.
All individuals who are either subject to full or limited tax liability to Denmark are obligated to submit a tax return, including all necessary additional information regarding income, to the Danish tax authorities by 1 May or no later than 1 July in the year following the relevant income year. When the final tax return has been reported, the Danish tax authorities elaborate a final tax assessment that states whether the individual has an underpayment of tax, excess tax, or neither of the two.
Individuals leaving Denmark have to file a tax return at the normal deadline. Income in the year of departure must be pro-rated in the same way as in the year of arrival.
If an individual is liable to either full or limited tax liability only for part of the calendar year, their income will be annualised. The individual may apply for the use of their actual income during the calendar year instead of annualising the income.
Reports and withholdings
In general, a reporting obligation is attached to almost any taxable payout. The reporting obligation lies with the authority, company, employer, bank, etc. that makes the payout. For certain kinds of payouts, such as salary, there is also an obligation for the employer to withhold the tax.
In connection with the payout of interests, the financial institution is responsible for reporting the payout but not for withholding the tax. This means that an underpayment of tax will occur for individuals who do not pay the tax immediately or have taken the payout into account in a preliminary tax return.
As for dividends, a tax of 27% must be withheld by the company distributing the dividend.
As for royalties, a withholding tax of 22% must be operated by the payer.
There are no specific withholding requirements regarding private individual’s profits from sales of private property. However, property value tax is part of the preliminary tax return and withheld this way.
Income from foreign sources must be reported in the final tax return by individuals who are tax treaty residents in Denmark.
Payment of tax
Tax liabilities for a certain income year should be stated in a preliminary tax return and in this way make it possible to pay taxes during the income year in question. When doing so, all known income and expenses must be taken into account.
Should unexpected income or expenses occur during an income year, the preliminary tax return can be changed. Alternatively, it is possible to make a voluntary payment of tax.
Ownership of property in other countries than Denmark must also be reported.
When the final tax has been assessed during the year following the income year in question, an underpayment of tax or an excess tax may occur. As a starting point, any underpayment of tax up to an amount of DKK 22,503 (in 2022) will be carried forward to the income year that follows the year in which the tax assessment is made. Exceeding underpayment of tax will be collected in three instalments, with due dates on 1 August, 1 September, and 1 October in the year of the assessment.
Taxes are either withheld and paid at source, paid through giro payment forms, or as a bank transfer.
Tax audit process
Tax administration in Denmark in general is handled by the Danish tax authorities.
The collection of taxes is based partly on the reporting from the taxpayer and partly on the compulsory reporting from employers, banks, and financial institutions, etc.
Each taxpayer is responsible for checking that the correct tax has been paid, and on the homepage of the tax authorities everyone with a Danish civil registration (CPR) number has their own electronic tax file, which provides access to all information (in Danish) about paid taxes, withholdings etc. A code to this file can be requested on the homepage of the tax authorities.
Statute of limitations
In general, time frames and due dates are defined by law and regulations in Denmark. This means that, as a main rule, limitations regarding tax claims are set in three years after the due date.
The main rule on statute of limitations after three years can be suspended if the tax authorities were not aware of the claim or the debtor.
Criminal acts can be investigated beyond the three years.
Further, generally, there is an ultimate limit of ten years.
Topics of focus for the tax authorities
Compliance in general has a high focus, and dawn raids are used where combined efforts are used by tax authorities, immigration authorities, and other relevant authorities. There is an increased audit focus on cross-border work/transactions.