MAJOR DEVELOPMENTS
In 1997, no major structural changes of the Danish tax
laws were implemented. New legislation on depreciation is expected in the Parliamentary year of 1997/98.
INCOME TAXES ON CORPORATIONS
1. RatesThe rate of corporation tax is 34%. Denmark taxes income on a worldwide basis.
2. Local Income Taxes
None.
3. Capital Gains Taxes
Most capital gains are added to a company taxable income and taxed at the regular corporate tax rate (see item 26).
4. Branch Profits Taxes
Branches of foreign corporations are subject to 34% corporation tax on the taxable income.
5. Foreign Tax Reliefs
Relief for taxes incurred outside Denmark is granted in accordance with double taxation treaties. If a treaty does not exist, credit for income taxes is given according to an internal provision.
Dividends from foreign subsidiaries generally are tax-exempt, if the Danish parent company holds at least 25% of the share capital of the subsidiary, and if the subsidiary is taxed according to rules not substantially different from Danish tax rules.
However, fully taxable dividends from foreign subsidiaries in EU countries qualify for tax relief for all or part of the underlying corporation tax.
A Danish company that can prove that part of its taxable income is derived from active business performed abroad is generally eligible for relief amounting to 50% of the tax relating to the foreign income. However, recently, the relief became subject to an annual reduction of 1/7 until the year 2000. In 1997, 1998, and 1999, relief amounting to 3/7, 2/7, and 1/7 of 50% of the tax relating to the foreign income (see
揝pecimen Tax Computation? will be given.
6. Classification of Corporations
Public Limited Company (Aktieselskab A/S). The minimum share capital is DKK 500,000.
Private Company Limited (Anpartsselskab ApS). The minimum capital is DKK 125,000.
Employees?Representation. Public limited companies and private limited companies that have employed more than an average of 35 persons over three years must elect a board of directors, and the employees are entitled to be represented on the board of directors.
Branch Office. Foreign public limited and private limited companies may carry on business in Denmark through a registered branch office if the foreign company:
q Is resident within the EU, or
q Is in compliance with an international agreement, or
q Is situated in a country in which branches of Danish companies are allowed, or
q Has obtained permission from the Ministry of Industry.Representative Office. Business of a preparatory nature only may also be carried out through a representative office.
7. Payment of Taxes
Computation of a company taxable income is based on the company own accounting year. Generally, an entity subject to corporation tax must have an accounting year-end of March 31, June 30, September 30, or December 31. Estimated corporate taxes must be paid in two installments during the income year, i.e., in March and November, respectively.
The estimated tax is calculated as 50% of the average income tax of the previous three income years. The remainder, if any, falls due in November the following year. An additional 11.75% of the amount will also be payable. Excess tax will be reimbursed inclusive of a tax-exempt addition of 7%.
8. Other MattersMergers, Divisions, Transfers of Assets, and Exchange of Shares. According to the EC Mergers Directive, mergers, etc., can be carried out tax-exempt. In most cases, permission must be applied for to obtain the tax exemption.
Generally speaking, the tax exemption entails that no taxable gains, recaptured depreciation, or taxable income arise as a result of the mergers, etc. In a tax-exempt merger, the continuing company acquires the status of the discontinuing company regarding, e.g., tax values and dates of and reasons for the acquisitions of assets.
INCOME TAXES ON INDIVIDUALS
9. Rates
Three types of income must be calculated in computation of the taxable income:
q Personal income;
q Investment income;
q Ordinary taxable income.
Furthermore, Share income,?i.e., dividend income, and gains/losses on the sale of shares, is calculated and taxed according to the rules described in items 26 and 28.
Taxable income is calculated as follows:
Personal income (wages, profits from self-employment, etc.)
+/? Investment income (income from capital, such as interest, etc.)
?Allowances
Taxable income
As a result of the 19
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