Skip to content

Taxes In Denmark

Each country's tax code is a multifaceted system with many moving parts, and Denmark is no exception. The first step towards understanding the Denmark tax code is knowing the basics.

How does the Denmark tax code rank? Below, we have highlighted a number of tax rates, ranks, and measures detailing the income tax, business tax, consumption tax, property tax, and international tax systems.

See Related Articles

Tax Data by Country

Get facts about taxes in your country and around the world.

Explore Data

International Tax Competitiveness Index

The Tax Foundation' s International Tax Competitiveness Index (ITCI) measures the degree to which the 38 OECD countries' tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code. The ITCI considers more than 40 variables across five categories: Corporate Taxes, Individual Taxes, Consumption Taxes, Property Taxes, and International Tax Rules.

The ITCI attempts to display not only which countries provide the best tax environment for investment but also the best tax environment for workers and businesses.

Sources of Revenue in Denmark

Countries raise tax revenue through a mix of individual income taxes, corporate income taxes, social insurance taxes, taxes on goods and services, and property taxes. The mix of tax policies can influence how distortionary or neutral a tax system is. Taxes on income can create more economic harm than taxes on consumption and property. However, the extent to which an individual country relies on any of these taxes can differ substantially.

Corporate Taxation in Denmark

The corporate income tax is a tax on the profits of corporations. All OECD countries levy a tax on corporate profits, but the rates and bases vary widely from country to country. Corporate income taxes are the most harmful tax for economic growth, but countries can mitigate those harms with lower corporate tax rates and generous capital allowances.

Capital allowances directly impact business incentives for new investments. In most countries, businesses are generally not allowed to immediately deduct the cost of capital investments. Instead, they are required to deduct these costs over several years, increasing the tax burden on new investments. This can be measured by calculating the percent of the present value cost that a business can deduct over the life of an asset. Countries with more generous capital allowances have tax systems that are more supportive to business investment, which underpins economic growth.

Individual Taxation in Denmark

Individual taxes are one of the most prevalent means of raising revenue to fund government across the OECD. Individual income taxes are levied on an individual's or household's income to fund general government operations. These taxes are typically progressive, meaning that the rate at which an individual's income is taxed increases as the individual earns more income.

In addition, countries have payroll taxes. These typically flat-rate taxes are levied on wage income in addition to a country's general individual income tax. However, revenue from these taxes is typically allocated specifically toward social insurance programs such as unemployment insurance, government pension programs, and health insurance.

High marginal income tax rates impact decisions to work and reduce the efficiency with which governments can raise revenue from their individual tax systems.

Capital gains and dividend income—if not included in the individual income tax—are typically taxed at a flat rate.

Consumption Taxes in Denmark

Consumption taxes are charged on goods and services and can take various forms. In the OECD and most of the world, the value-added tax (VAT) is the most common consumption tax. Most consumption taxes either do not tax intermediate business inputs or provide a credit for taxes already paid on inputs, which avoids the problem of tax pyramiding, whereby the same final good or service is taxed multiple times in the production process. The exclusion of business inputs makes a consumption tax one of the most economically efficient means of raising tax revenue.

However, many countries fail to define their tax base correctly. To minimize distortions, all final consumption should be taxed at the same standard rate. However, countries often exempt too many goods and services from taxation or tax them at reduced rates, which requires them to levy higher standard rates to raise sufficient revenue. Some countries also fail to properly exempt business inputs. For example, states in the United States often levy sales taxes on machinery and equipment.

Property Taxes in Denmark

Property taxes apply to assets of an individual or a business. Estate and inheritance taxes, for example, are due upon the death of an individual and the passing of his or her estate to an heir, respectively. Taxes on real property, on the other hand, are paid at set intervals—often annually—on the value of taxable property such as land and houses.

Many property taxes are highly distortive and add significant complexity to the life of a taxpayer or business. Estate and inheritance taxes create disincentives against additional work and saving, which damages productivity and output. Financial transaction taxes increase the cost of capital, which limits the flow of investment capital to its most efficient allocations. Taxes on wealth limit the capital available in the economy, which damages long-term economic growth and innovation.

Sound tax policy minimizes economic distortions. With the exception of taxes on land, most property taxes increase economic distortions and have long-term negative effects on an economy and its productivity.

International Taxes in Denmark

In an increasingly globalized economy, businesses often expand beyond the borders of their home countries to reach customers around the world. As a result, countries need to define rules determining how, or if, corporate income earned in foreign countries is taxed. International tax rules deal with the systems and regulations that countries apply to those business activities.

Tax treaties align many tax laws between two countries and attempt to reduce double taxation, particularly by reducing or eliminating withholding taxes between the countries. Countries with a greater number of partners in their tax treaty network have more attractive tax regimes for foreign investment and are more competitive than countries with fewer treaties.


All Related Articles

2024 beer taxes in Europe and EU beer tax rates or excise duty on beer

Beer Taxes in Europe, 2024

As Oktoberfest celebrations wrap up across the continent, now is a great time to examine beer taxes in the European Union. Hefty beer taxes add to the price of every drink consumed.

5 min read
Real property taxes in Europe property tax rates 2024

Real Property Taxes in Europe, 2024

High property taxes levied not only on land but also on buildings and structures can discourage investment in infrastructure, which businesses would have to pay additional tax on.

3 min read
EU excise duties on cigarettes and 2024 EU tobacco and EU cigarette taxes in Europe

Cigarette Taxes in Europe, 2024

Explore the latest EU tobacco and cigarette tax rates, including EU excise duties on cigarettes. Compare cigarette taxes in Europe.

3 min read
OECD Pillar Two Global Minimum Tax Unintended Consequences

Pillar Two’s Unintended Consequences

Pillar Two risks creating a more complex and unfair international tax system. It is inadvertently fostering new, opaque, and complex forms of competition, and policymakers should consider alternative approaches to creating a fairer international tax environment.

4 min read
Gas Taxes in Europe 2024 Gas Taxes and Diesel Taxes in Europe Fuel Tax Rates

Diesel and Gas Taxes in Europe, 2024

Gas and diesel taxes continue to be prominent policy issues throughout Europe. As the EU undergoes sweeping changes for its green transition, fuel taxes are likely to be a crucial aspect of policy discussions.

3 min read
Capital allowances in Europe can impact depreciation in Europe and capital investment and business investment in Europe

Capital Allowances in Europe, 2024

Although sometimes overlooked in discussions about corporate taxation, capital allowances play an important role in a country’s corporate tax base and can impact investment decisions—with far-reaching economic consequences.

4 min read

Patent Box Regimes in Europe, 2024

The aim of patent boxes is generally to encourage and attract local research and development (R&D) and to incentivize businesses to locate IP in the country. However, patent boxes can introduce another level of complexity to a tax system, and some recent research questions whether patent boxes are actually effective in driving innovation.

3 min read
global tax agreement global tax deal OECD global minimum tax rules corporate minimum tax rules Secretariat Proposal, OECD Public Consultation Document, Unified Approach under pillar one profit shifting definition tax planning and avoidance foreign direct investment FDI global tax deal impact of global tax agreement OECD international tax proposal

The Latest on the Global Tax Agreement

The agreement represents a major change for tax competition, and many countries will be rethinking their tax policies for multinationals.

8 min read