SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory developments in the past year.
TERRITORIALITY AND RESIDENCE
Danish tax legislation distinguishes between full and limited tax liability. The main criteria are residence, length of stay, place of work, employer's residence, and type of income, as described below. Citizenship does not affect Danish tax liability.Individuals are subject to full tax liability when (1) take up residence or
(2) stay in Denmark without taking up residence when the stay exceeds six consecutive months interrupted only by short stays abroad (and then as from the day of arrival). An individual subject to full tax liability in Denmark is taxed on worldwide income and gains received or accrued.Individuals are subject to limited tax liability on Danish-situs services and other Danish-source income. Dividends are taxed separately.Separate rules apply to contract labor and individuals participating in oil
and gas exploration activities.
GROSS INCOME
Employee gross income/ All remuneration from employment, whether in cash or in kind, is subject to tax when the employee has obtained a legal right to the remuneration, regardless of where payment is made and regardless of whether remitted. The liability extends to any living or housing allowance and any reimbursement of tax or other personal liability, whether paid
directly to an employee or borne by the employer on the employee's behalf.Payments to an employee for expenses of travel, entertainment, or any other service to be performed on behalf of the employer are taxable only to the extent that they are not actually expended in the performance of the service.
Special rules apply for free housing provided by the employer and some work-related benefits-in-kind of less than DKK4,400.
Capital gains and investment income/ Taxable gains and investment income are added to taxable income. Certain allowances are available. Profit on the sale of a private house in which the owner has lived and that is situated on property having an area of less than, normally, 1,400 square
meters is tax exempt. Gains on the sale of shares in a quoted company are exempt if the shares have been owned for at least three years and the shareholder's total shareholding of all quoted shares for at least three years has been worth less than DKK121,400 (DKK242,800 for a married couple).The taxable income of an individual subject to full tax liability includes
interest, cash dividends, profits from gains on the sale of shares owned less than three years, rents, royalties, professional fees, pensions, annuities, and alimony from all sources, wherever located, subject to any limitation that may be imposed under a tax treaty.Dividends received from both domestic and foreign companies by resident individuals are subject to income tax. Dividends and gains on the sale of
shares owned at least three years of up to DKK38,500 (Dkk77,000 for a married couple)are taxed at 28%. Dividends and gains on the sale of shares in excess of this amount must be reported and are taxed at a rate of 43%.Exit taxation applies on shareholders leaving Denmark. However, the tax applies only if the shareholder has been subject to full Danish taxation for at least five years within the last 10 years before the cessation of tax liability. The rules apply to both Danish and foreign shares. To avoid the burden of paying tax on an unrealized profit, permission can be obtained to postpone payment until the taxpayer has actually disposed of the shares.
DEDUCTIONS
Business deductions/ An employee is entitled to deduct traveling expenses (in accordance with special rules), subscriptions to professional associations, necessary business literature, tools of trade, and so on (exceeding DKK4,400 per calendar year).Expatriates taking up temporary residence in Denmark may be granted an annual allowance for extra costs of living equal to the lesser of (1) DKK8,000 plus 5% of gross earned income or (2) 25% of gross earned income. This allowance is granted for the first two years; it will be granted only if an expatriate intends to stay in Denmark for no more than three years. It is also a condition that the assignee continue to be paid by the foreign employer.
Special tax legislation covers foreigners who sign contracts for work in Denmark after June 1, 1991. According to this legislation, a tax of only 25% will be levied on their gross income, provided their stay in Denmark is more than six months but not longer than 36 months and their monthly income after ATP (ATP-bidrag) and labor market contribution exceedsDKK50,900.
However, taking into account the 9% labor market (i.e., social) contribution (see below), the amount before ATP and this 9% tax s DKK56,01
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