1. Moving to Denmark? – A tax guide

There are certain rules to follow when moving to Denmark to fulfil your obligations to the Danish Tax Authorities. According to KSL § 1, stk. 1, nr. 1, a natural person becomes tax liable when there is an official residence in Denmark. Residence means having property at disposal to live in.

Importance of a tax card

It is important when moving to Denmark to change the officially registered address (Folkeregisteradresse) to a Danish address and request the Danish Tax Authorities for a tax card.

The tax card shows the income tax rate of the income which is subject to taxation. The Danish employer can’t disburse salary without a tax card on the employee.

Obligations when moving to Denmark

Newcomers have a duty to provide information to the Danish Tax Authorities about for instance foreign:

1) shares in companies,

2) bonds and other financial assets,

2) properties,

3) accounts and deposits,

4) outstanding depts,

5) pension arrangements, and

6) life insurance.

There is also an obligation to inform about income related to the above-mentioned assets each year. Information is given by filling out tax forms available at the Danish Tax Authorities’ website.

The tax effects

The value of the assets brought into Denmark must be estimated at the entrance date.

The Danish Tax Authorities do not automatically get information about foreign pension arrangement, foreign dividends on shares and foreign properties and therefore it is important to fill out the forms.

In general, all the income from foreign assets will be subject to Danish taxation but with a deduction for the tax paid in foreign countries.

If the newcomer does not provide information about the acquisition cost on shares, bonds and other financial assets, the right to deduct losses will be lost cf. ABL § 14, stk. 3 and KGL § 15, stk. 3.

2. Is there a duty to declare when moving to Denmark?

The Danish Tax Authorities advise newcomers to contact them after the newcomer changes their officially registered address to Denmark.

The newcomer must declare the settlement to the local authority in the municipality they are moving to.

The local authority will only allow settlement if:

• you already stay in Denmark and must stay in Denmark for at least three months,
• you already have acquired address or residence in Denmark, and
• you have legal stay in Denmark.

The newcomer must register the settlement five days after acquiring residence and legal stay in Denmark to the local authority.

Besides the obligation to register settlement, the newcomer also has a duty to provide information about assets which has been brought into Denmark. For instance, the newcomer has an obligation to provide information about shares in companies when moving to Denmark. For more information read (HENVISNING TIL KLUMME nr. 4: How Should I declare my shares when moving to Denmark?)

The newcomer will lose the right to deduct losses from shares and bonds if the information is not provided cf. ABL § 14, stk. 3 and KGL § 15, stk. 3.

3. Do I need a tax card when moving to Denmark?

A tax card gives information to the employer of how much tax the employer must withhold to the Danish Tax Authorities.  

If the employee is working as a wage earner (employed person) in Denmark, the employee must apply for a Danish Tax card and a personal tax number (CPR-nr.).

The consequences of not applying for a tax card is, that the wage will be taxed with 55 % A-tax + 8 % in labour market contribution. The taxation will therefore exceed the actual top tax rate in Denmark.

The application of a tax card must be filed to the Danish Tax Authorities.

4. How should I declare my shares and bonds when moving to Denmark?

The Danish Tax Authorities advice newcomers to inform them of shares and bonds when moving to Denmark. The information is given by filling out the information forms from the Danish Tax Authorities or by filling out the annual tax return. The Danish Tax Authorities advice newcomers to contact them if they are in doubt about the formal registration of shares and bonds when moving to Denmark.

Shares and bonds are subject to Danish profit taxation when the tax obligation to Denmark occurs in accordance with ABL § 37, KGL § 36 and KSL § 1. The tax obligation occurs when a person has residence at disposal in Denmark or when a person stays in Denmark for at least six months.

In Denmark, the taxation of shares and bonds is generally a profit taxation. The Danish Tax Authorities must get information about the acquisition cost and the compensation to estimate the profit which is subject to taxation. When moving to Denmark, the acquisition cost is appointed to the market value, and at that time there is an obligation to pay tax to Denmark.

If the newcomer does not provide information about the acquisition cost on shares and bonds, the right to deduct will be lost cf. ABL § 14, stk. 3 and KGL § 15, stk. 3.

The tax rate of profits and yield from shares is 27 % for the first 57.200 DKK (in 2022) and 42 % for the rest.

Interests on bonds are always subject to taxation cf. SL § 4, stk. 1, litra e. Profits on bonds are only subject to taxation if the triviality limit on 2,000 DKK is exceeded in accordance with KGL § 14, stk. 1. 

5. When does tax liability arise when working in Denmark?

If you are working in Denmark, limited tax liability may arise. According to (KSL) § 2, stk. 1, nr. 1, salary earned for personal work in relation to an employment in Denmark is subject for taxation in Denmark.

The salary is subject for taxation, irrespective of the salary consisting of cash or employee benefits e.g., free use of a car, phone, or a house. Remuneration for accepting a competition clause or redundancy payment are also subject to taxation for example.

However, the work must be executed in Denmark physically. Hence, if you are working for a Danish company from abroad, tax liability does not arise. If only a part of the job is executed physically in Denmark, the limited tax liability will only include the part of the salary that can be attributed to the work executed physically in Denmark.

Additionally, the limited tax liability includes only salary paid from an employer with domicile or a permanent establishment in Denmark.

6. Permanent establishment in Denmark?

If a foreign person or company operates a business through a physical permanent establishment in Denmark it will establish limited tax liability in Denmark.

The permanent establishment must be physical and can – for example – be a branch, an office, a factory, a workshop, or a gas or oil source. In some situations, a home office can also be a permanent establishment.

However, some activities won’t establish limited tax liability to Denmark even though the activities are exercised through a physical permanent establishment in Denmark. The term “permanent establishment” do not cover 1) the use of devices exclusively for storage, exhibition or delivery of goods belonging to the foreign person or company, 2) the maintenance of a permanent establishment solely for the purpose of purchasing goods or providing information to the foreign person or company, or 3) the maintenance of a permanent establishment solely for the purpose of other activities of a preparatory or auxiliary nature for the foreign person or company.

Further, the limited tax liability is extended to also include situations where the foreign person or company conducts business through a local and dependent agent. The characteristic of agent relations is that the agent makes agreements in the name of the employer and on his behalf.

If limited tax liability is established due to a permanent establishment in Denmark, the person or company is tax liable of all income from the permanent establishment. However, the person or company can deduct the taxable income with all expenses regarding the permanent establishment.

Please contact our tax specialist in order to receive further information concerning tax circumstances when moving to Denmark.