Corporate Tax in Denmark

Foreign investors are invited to open companies in Denmark by the central authorities which have established various incentives. Among these a legislation favoring foreign direct investment, the Commercial Law which allows for the creation of Danish holding companies – one of the most sought types of structures all over the world and the taxation system which provides for simplicity in collecting the taxes and transparency.

Companies in Denmark are subject to various taxes among which the most important one is the corporate tax. Below, our Danish lawyers explain what the corporate tax is and how it is collected.

How does the corporate tax apply in Denmark?

While the value added tax which is an indirect tax and is applied to final consumer, the Danish corporate tax is a direct levy and is applied to companies. Unlike the corporate tax, the VAT is only collected by companies in Denmark.

According to the tax legislation, the corporate tax in Denmark applies to the taxable of income earned by businesses with a registered address in this country. The taxable base of a company is made of the income generated by the business in or outside the Danish territory. The standard rate of the income tax on companies’ income is 22%.  However, many expenses incurred by Danish companies are deductible and usually lead to a lower corporate tax rate of 19%.

Our lawyers in Denmark can offer more information about the expenses which can be deducted by companies and their qualification criteria.

Payment of the corporate tax in Denmark

In order to be able to pay the corporate tax, upon registration a Danish company must register with the tax authorities which will issue a unique tax number for the business. All companies registered in Denmark, including permanent establishment of foreign companies, must file general tax returns in order to pay the corporate tax. However, under Denmark’s double tax treaties the corporate tax and other taxes paid here can be recovered by the parent company of the permanent establishment operating here.

The annual tax returns for Danish companies must be filed no later than 6 months after the end of their financial year. Based on the return, the authorities will calculate the taxable base and inform the companies the corporate tax they are subject to.

For full information on how the company tax applies, please feel free to contact us. Our law firm in Denmark can also assist foreign investors who want to open companies here.