The Tax System in Denmark

Personal income taxation

Tax residents are taxed on their world wide income. The regular tax system is based on progressive taxation with rates up to approx. 55 %. The personal income tax computation formula is complex and can only be checked by experienced advisors.

For highly salaried expats the system offers a special 26 % (effective taxation of approx 32% ) expat taxation of salary for up to 5 years.

The Danish tax rules are complicated to understand but tax advantages can be found when properly investigated and planned.

General net wealth taxation does not exist but real estate world wide is subject to a deemed wealth tax.

To give a fair comparison of the Danish personal taxation with other countries the personal income taxation should include the social security contributions which are very small amounting normally only to approx 1% for the employee and approx 2% for the employer. This implies that the employer considers the social contribution as an insignificant cost thus very often is prepared to offer a salary higher than the other EU countries.

The taxation of return on capital has numerous options and this should be addressed to take advantage hereof in order to minimize the taxation.

Taxation of pensions is especially subject to different non Danish pension’s tax rules and investigation and planning is a must to limit the taxation.

Corporate taxation

The corporate tax rate is 22% on net income inall limited liability companies. Partnerships are not subject to corporate taxation since partnerships are considered transparent.

Limited liability companies can be used as operating companies  as well as holding companies. Both kinds are effective tax planning tools for both Danish resident and non resident individuals as well as for non Danish registered companies.

If you need assistance and advice on personal or corporate tax in Denmark contact us on info@inwema.dk.