A guide to declare your pension when moving to Denmark

When you move to Denmark and establish full tax liability to Denmark, you are obligated to inform the Danish Tax Authorities (Skattestyrelsen) about your assets and savings outside of Denmark, which means assets and savings that are placed in any other country. This includes pension schemes.

Your pension is not automatically being reported to the Danish Tax Agency when you receive pension abroad. As a result, you have to declare your pension.

You must complete and submit form number 49.020 (Declaration L) to the Danish Tax Authorities if you have a pension scheme outside of Denmark when you move to Denmark and establish full tax liability.

Further, if you set up a pension scheme outside of Denmark, it will be subject to a tax deduction according to section 15 D of the Danish Pension Tax Act (Pensionsbeksatningsloven) within 60 months after moving to Denmark.

The form can be found on the Danish Tax Agency’s website.

Furthermore, you must declare the following information each year before July 1^st to the Danish Tax Agency:

• Name, address, and CPR no. of policy holder
• Name and address of pension provider
• Total value of the life insurance/pension scheme at year-end
• Payments from the scheme for the year
• The returns on the scheme for the year calculated according to sections 3-5 of the Danish Taxation of Pension Investment Returns Act (Pensionsafkastbeskatningsloven) (to be entered in field 433 of the declaration).

You can send the form to the Danish Tax Agency online or by post.

Tax on foreign pensions in Denmark

If you are living in Denmark and you receive disbursements from foreign pensions, the pension might be taxable in Denmark.

Foreign pensions are as a rule taxable in Denmark, due to the global income principle in Statsskattelovens § 4.

An exemption to this rule is if the contributions to the pension scheme is made with already taxed funds. The disbursements from those pensions are not taxable in Denmark in accordance with Pensionsbeskatningslovens § 53 B.

If the pension is not excluded from being taxable in Danmark, the amount of tax you have pay differs depending on the kind of pension and if Denmark has entered into a double taxation agreement with the paying country.

Depending on the type of pension, the double taxation agreements differentiate between two methods to avoid double taxation: Credit or exemption.

The credit method allows Denmark to tax the pension, but they must give deduction for tax already paid in the paying country.

The exemption method does not allow Denmark to tax the pension, but they will generally be allowed in the double taxation agreement to include the income in the Danish income statement.

According to the specific double taxation agreement, the method used will be based on the type of pension.

In Danish law we operate with three kinds of pensions:

1. Social pension
2. Private pension
3. Public pension

Social pension is categorised as statutory mandatory pension schemes based on the rules for social security in the pension paying country. A Danish example of the pension type is state pension (Folkepension). The method used to avoid double taxation for social pensions is very different depending on the specific double taxation agreement, so either of the two methods might apply.

Private pension is pension schemes set up by the pension recipient or a former employer, for instance in a bank or insurance company. The taxation is depending on if the pension contributions have been deductible. If the contributions haven’t been deductible, generally the pension is not taxable in Denmark. If the pension contributions have been deductible, the method used to avoid double taxation for private pensions is generally the credit method, meaning the pension is taxable in Denmark.

Public pension is pension schemes specifically related to special kinds of former public employments, in Denmark the best example of this kind of pension is Tjenestemandspension. The method used to avoid double taxation for public pensions is generally exemption, meaning the pension is not taxable in Denmark.

When moving to Denmark, you are obligated to inform the Danish tax authorities of any foreign pensions you have, because foreign pensions are not automatically reported to Denmark. For further information on this subject please see our column: “Shall I declare my pension when moving to Denmark?”.

If you want to know more, you are welcome to contact our experts.