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Denmark: Living There - Tax Issues

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Living There

INDIVIDUAL TAXATION

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.

INCOME TAX

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.

State 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.

RENTAL INCOME
The taxable rental income can be computed in two ways:

• Income less related costs such as maintenance costs, depreciation and property taxes
• Income less an allowance of DKK 7,000 (€939); 40% of the result is deducted in lieu of all deductions and costs

The resulting taxable income is then taxed at progressive rates from 5.48% to 15%.

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%.

PROPERTY TAX

National Property Tax

A national property tax is levied on the value of properties in Denmark. The taxable value is the lowest of:

1. the assessed value as of 01 January of the current tax year;
2. 105% of the assessed value as of 01 January 2001;
3. the assessed value as of 01 January 2002.

The tax rate is 1% of the taxable value up to DKK 3,040,000 (€407,791) and 3% on the value in excess of the limit. If the property was acquired before 01 July 1988, the applicable rates are generally reduced yo 0.5% and 2.8% respectively.

Municipal Real Estate Tax

The municipal real estate tax rate is levied on the land value. The tax rate is between 1.6% and 3.4%, varying depending on the location.

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