Taxes and Tax Schemes in Denmark | What You Need to Know in 2025

Denmark, a Scandinavian country known for its high standard of living, strong welfare system, and innovative economy, operates a comprehensive tax system that affects both residents and non-residents. Located in Northern Europe, Denmark combines a robust economy with a high quality of life, making it an attractive destination for international professionals and businesses.

Denmark's economy, one of the most stable and prosperous in the European Union, has shown resilience despite global economic challenges. The country's tax system is designed to support social welfare while maintaining competitiveness in the global market. Recent reforms have focused on simplifying tax procedures and enhancing digital tax filing for foreign residents.

The expat community in Denmark is significant, with many professionals drawn to sectors like technology, healthcare, and education. The tax system, while detailed, offers various benefits and deductions that can significantly impact an expat's financial planning.

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Danish Income Tax

Denmark employs a progressive income tax system with rates ranging from 12.11% to 55.9%. Resident taxpayers are subject to taxation on their worldwide income, while non-residents are taxed only on Denmark-sourced income. The system includes various social security contributions, which fund public services like healthcare and education.

Tax residents face the following income tax brackets (as of 2025):

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Additionally, social security contributions are generally calculated at around 8% of gross income, bringing the effective maximum tax rate to approximately 63.9%.

If you want to have a better understanding of the taxes you should pay on personal income in Denmark, you can use the personal tax calculator in the Taxation section of the Denmark page.‍

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Danish Tax on Overseas Income‍

Denmark's treatment of foreign income depends on residency status. The country recognizes two main categories of taxpayers:

1. Residents: Taxed on worldwide income
2. Non-residents: Taxed only on Denmark-sourced income

This system particularly benefits non-residents, who are only taxed on income earned within Denmark. However, residents must declare and pay taxes on their worldwide income, with potential relief through double taxation treaties.

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‍Danish Tax on Investments‍

Investment income in Denmark receives specific tax treatment. Dividends and capital gains from listed stocks are typically taxed at a flat rate of 27% for income up to DKK 56,500 and 42% for income above this threshold. The system includes:

• Dividends: Taxed at 27% (up to DKK 56,500) and 42% (above DKK 56,500)
• Capital Gains: Taxed at 27% (up to DKK 56,500) and 42% (above DKK 56,500)
• Interest Income: Taxed at 37%
• Rental Income: Taxed at progressive income tax rates, with deductions for expenses

Real estate investments face both federal and municipal taxes, with potential deductions for depreciation, maintenance, and other expenses.‍

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‍Danish Corporate Taxation

‍Corporate tax in Denmark comprises several components:

• Federal corporate tax: 22%
• Value Added Tax (VAT): 25% standard rate, with reduced rates for certain goods and services
• Municipal business tax: Varies by municipality, typically around 1%

The effective corporate tax rate typically ranges from 22% to 23%, depending on the company's location. Small and medium-sized enterprises may qualify for certain tax reliefs and incentives.‍

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Special Tax Regimes‍

Denmark offers several special tax arrangements beneficial to international professionals:

1. Research and Development (R&D) Incentives: Tax credits and deductions for companies engaged in R&D activities.
2. Foreign Income Tax Relief: Available to prevent double taxation on overseas income for residents.
3. Special Tax Benefits for Key Workers: Tax incentives for qualified foreign professionals working in Danish companies.
4. Investment Allowances: Deductions for investments in certain regions or sectors.

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Regional Comparison‍

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Tax Planning for Denmark

‍Effective tax planning in Denmark requires attention to several key areas:

1. Residency Status Management: Strategic planning of residency status can optimize tax treatment of foreign income.
2. Investment Strategy: Utilizing tax-advantaged accounts and long-term holding periods can optimize investment income.
3. Documentation: Maintaining clear records of overseas assets and income sources is crucial.
4. Professional Advice: Engaging with tax professionals to navigate the complexities of the Danish tax system.

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