Denmark: Living There - Tax Issues

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INDIVIDUAL TAXATION

INCOME TAX

Danish residents are taxed on their worldwide income. Foreign individuals become residents if they reside in the country for more than 180 days. Residents are entitled to certain allowances and deductions.

Resident taxpayers are taxable on almost all kinds of income, and taxable income is generally an aggregate of personal and capital income. The taxable income is computed as gross income less allowances and deductions.

Deductions

Residents are entitled to deduct the following from their taxable income:

• Mortgage interest and other interest payments


• Life insurance premiums if the policy qualifies under the Law on Taxation of Pensions


• Premiums to annuity pension schemes are generally deductible from personal income, while premiums to capital pension schemes are deductible only up to DKK43,100 (€5,781) per year


• Expenses incurred in generating income are generally deductible.

Public donations are deductible if made to an approved organization. However, only those in excess of DKK500 (€67) are deductible, with a maximum of DKK6,800 (€912).

• An employment allowance of 2.5% of the taxable income is also deductible from the taxable income. The maximum deduction for this allowance is DKK7,500 (€1,006).


• A personal tax credit of DKK39,500 (€5,298) is also deductible from taxable income, at both national and municipal levels.

Income Tax

State income tax is imposed at progressive rates. It is levied on the computed taxable income, which is the aggregate of personal and capital income.

Capital Gains

Capital gains are included in the computation for the aggregate taxable income, and are taxed at progressive rates.

According to the detached house rule, profits from selling residential properties measuring less than 1,400 sq m and has served as the owner’s primary residence either fully or partially throughout the ownership period are exempt from taxation.

Municipal Income Tax

Municipal income tax is levied on taxable income and varies according to the municipality, between 20.14% and 26.71%. In Copenhagen, the country’s capital, the municipal tax rate is 24%.

Health Contribution Tax

The health contribution tax, charged at 8% of the taxable income, is a substitute for the abolished county income tax.

Church Tax

A church tax is also being levied on taxable income, but this only applies to members of the Danish State Church. The rate varies from municipality to municipality, ranging from 0.42% to 1.5%.

Denmark - more data and information

• Lawyers (attorneys) with property law practices in Denmark

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