Denmark is a country with a progressive welfare, with significant public services being covered by taxes, like for example healthcare. The taxation system in Denmark is based on the principle of progression, meaning that taxation is higher for a bigger income.
As follows, our company formation specialists in Denmark briefly explain the Danish taxation system.
The income tax in Denmark
Denmark has a Minister of Taxation and Ministry of Taxation with different agencies, including SKAT (the main state authority according to which the Danish Treasury calculates and collects taxes and applies the tax rates).
The personal income tax system in Denmark is quite complex and it includes the following rates:
• a labor market contribution of 8% of the total income;
• a deduction before any tax is applied: personal allowance of DKK 44,000 (USD 6,319) from municipal taxes, 3% health contributions and bottom-bracket taxation of 9.08%;
• highest tax rate of 15% on income which exceeds DKK 467,300 (USD 67,086);
• municipal taxation: it varies, however it averages around 25.3%;
• social security contributions;
• church taxation: 0.7%.
Corporate taxes in Denmark
The corporate income in Denmark, except deductions and depreciations, is taxed with a rate of 22%. Since business expenses and depreciations can be deducted, the actual corporate income tax could be lower though.
In Denmark, there are no trade taxes, capital duties, wealth taxes or share transfer duties.
When it comes to dividends from subsidiaries, shares can commonly be received or distributed without a taxation or a withholding tax, if certain requirements are met. Our Danish company formation advisors can offer more information on what these requirements consist of.
All business entities incorporated in Denmark are subject to a corporate tax. Foreign and European companies with their management in the country or which activate through a permanent establishment in Denmark are also subject to a corporate taxation.
If you need to know more about the Danish taxation system, or if you want to open a Danish company, we invite you to contact our company registration advisors in Denmark.