Taxation of international executives
Labour market supplementary pension (ATP)
In general employers in Denmark pay a number of minor contributions (ATP, AER, AES, LG etc, hereinafter referred to as ATP) amounting to approximately DKK8-10,000 per employee per year, excl. of mandatory industrial injury insurance.
The employee also contributes to ATP with DKK1,080 per year (in case of full time employment).
Labour market contributions (AM-contribution)
As of 1 January 2011, the AM-contribution became fully converted into a tax. Thus, employees are liable to pay the Labour Market contributions of 8 percent of their employment income in Denmark if they are tax liable on their employment income, regardless of whether or not they are subject to another country's social security scheme according to EC regulation 1408/71 or EC regulation 883/2004 or another social security convention.
As a main rule, the AM-contributions are withheld by the employer and are deductible against personal income before the calculation of income tax.
AM-contributions on pension plan payments made by the employer on behalf of the employee are withheld by the bank or the insurance company.
Hence, the employee part of the social security contributions for 2012 will merely amount to approximately DKK1,080 (EUR145) (Labour Market Supplementary Pension).
The employee is entitled to at least five weeks holiday. Salaried employees receive full salary during holidays if they have been employed for a full calendar year.
Inheritance and gift tax1
Danish inheritance tax is payable provided the deceased was domiciled in Denmark at the time of death. If the deceased did not reside in Denmark but owned assets located in Denmark that are not included in an estate processed outside Denmark, Danish inheritance tax may be payable. Further, if the deceased did not reside in Denmark at the time of death but was a Danish national or had other special attachments to Denmark and owned assets that are not included in an estate processed outside Denmark, Danish inheritance tax may also in that situation be payable.
The rate depends on the relationship between the heir and the deceased. The rate for children and certain other close relatives is 15 percent of the estate exceeding DKK 264,100 (2012). For other heirs, the rate is up to 36.25 percent. Inheritance from a spouse is tax exempt.
Gift tax applies if the donee or the donor is resident in Denmark, or if the gift consists of real estate or assets belonging to a permanent establishment in Denmark. Gifts between spouses are tax exempt.
Gifts between children and parents and certain other close relatives are subject to 15 percent tax. Gifts to grandparents are subject to 36.25 percent tax. Gifts not exceeding DKK 58,700 (2012) are tax exempt. Gifts to unrelated parties are treated as personal income in the hands of the recipient.
Basically there is no wealth tax in Denmark, although the property value tax mentioned later is to a certain extent classified as such.
Property value tax2
Property value tax is calculated on the basis of the taxable value of any real estate owned on 1 January of the income year in which the owner uses the property as a private residence.
The taxable value is the lowest amount of either the public property value on 1 January 2001 plus 5 percent, the value on 1 October in the income year or the value on 1 January 2002. Taxable value up to DKK 3,040,000 is taxed at 1 percent.Taxable value in excess of DKK 3,040,000 is taxed at 3 percent.
These taxable values also apply to foreign property taxable in Denmark. In order to estimate the value, a foreign assessment of the property is acceptable if it is similar to a Danish assessment. If there is no foreign assessment, the value of the property can be estimated on the basis of a foreign index. Both the foreign assessment and the foreign index must be approved by the Danish tax authorities.
Restrictions apply to the increase in real property value tax from one year to the next. Lower rates apply to property acquired on or before 1 July 1998 and to property owned by pensioners.
Property in Denmark is liable to property tax. The tax is between 1.6 and 3.4 percent on the basic value less deductions for improvements.
Real property transfer taxes3
A real property transfer tax of 0.6 percent of the sales price or the public evaluation (whichever is the highest) is liable on the transfer of title to real property situated in Denmark. The amount is rounded up to the nearest DKK100. A registration duty of DKK1,400 is charged for registration of ownership.
Value-added tax (VAT) is 25 percent on all goods and services.
Some goods and service are zero rated or VAT exempt
Income from unemployment funds or similar is taxed as ordinary income.
Goods brought into Denmark from a non-EU country may be liable to customs duty and VAT. The customs duty will depend on the type of goods and the value or quantity of the goods.
Goods brought into Denmark by ship or air travel from a non-EU country worth more than DKK 3,250, will be liable to customs duty and VAT. The threshold is DKK 2,250 if you use other means of transport. Goods cannot be considered split either between travel companions or into two amounts for the goods.
According to a special set of rules, customs and excise duties and VAT are payable on the purchase of alcohol and tobacco above a certain volume. The imported goods must be reported and customs duty and other taxes must be paid upon arrival in Denmark (for example at the airport or the border).
Excise duties are levied on the import, manufacture, and sale of certain goods. The excise duty has already been paid on goods purchased in a shop. Excise duty is charged on wine, beer, batteries, chocolate, sweets, soft drinks, and so on.
Registration tax on vehicles
An additional registration tax of up to 180 percent of the value of a vehicle in Denmark is payable on the purchase of a car or motorcycle.
Under certain conditions, expatriates staying in Denmark may bring their private car to Denmark without having to pay a registration tax, provided they do not take up residency in Denmark, and do not have their family living with them in Denmark. Expatriates who are not Danish citizens and who stay for a limited period can choose to pay according to a quarterly scheme. According to the scheme, a certain percentage of the registration fee is paid along with a fixed interest fee.
No VAT and customs duties are levied on cars brought to Denmark for private use by expatriates from other EU countries. The same applies to import from non-EU countries provided the car has been owned and used by the expatriate for at least six months in the country from which the expatriate comes and the expatriate has been staying there for at least 12 months. However, restrictions apply to cars brought into Denmark without customs, for example the owner is not allowed to sell the car within the first year.
A registration fee is payable in relation to registration with the Danish registration authority of ownership and security rights regarding real estate, moveable property, ships and airplanes.
As a main rule the registration fees are as follows:
Please note that special rules apply regarding the calculation of the registration fee basis as well as regarding certain situations or certain moveable properties including certain ships.
1According to the Danish tax authorities, the estate and gift tax act (boafgiftsloven) of 2001 and subsequent amendments.
2According to the Danish tax authorities, the property value tax act (ejendomsværdiskatteloven) of 2002 and subsequent amendments.
3According to the Danish tax authorities, the real property transfer tax act (Lov om afgift af tinglysning og registrering af ejer-og panterettigheder m.v.) of 1999 and subsequent amendments.
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