Tax planning for residents of Denmark
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Denmark is quite an interesting place. In my opinion, Copenhagen is a mix of Amsterdam and Helsinki. There are bikes all over the place, maybe even more than in Amsterdam. Culture is very progressive and open-minded.
However, taxes in Denmark are among the highest in the world.
Their top tax bracket, not including the church tax, is 55,8%. Dividends are taxed at 42%.
Corporate tax is not so crazy, it’s 22%.
All the Scandinavian countries are very expensive places to be.
Partying, eating out, transportation and hotels downtown are very very pricy.
In Denmark, there is an interesting thing when it comes to management and control rules. They have something that’s called ‘’ day to day management’’. It’s harder to get around it. Usually, in this case, you would see something that refers to the directors of the company. Here these rules are based on what’s going on day to day in your company.
This gets it quite tricky if you want to have a foreign company because you will have to have real managers doing stuff for you from abroad. The best situation is if you have foreign partners that can carry on day to day management duties.
The percentage to trigger CFC rules in Denmark is only 50%, which is good. They have participation exemption which means that you can receive dividends tax-free into a Danish holding company in many cases.
The norm for you as a Danish resident is to do as much as possible to escape this 55.8% tax this is the top tax bracket.
The first step would be to register a foreign company abroad. Besides this, you will need to have a genuine day to day management activities happening in this foreign country. The key is that you defer as much as possible, keep things outside of the country. Rules are quite intense and tax rates are outrageously high.
However, Denmark is a very nice place with a good standard of living. It doesn’t surprise why many people are happy to live here and are not considering relocating somewhere else despite high taxes.
If you are a business owner who is not satisfied with those, you can reach out to us so we can help you with a corporate structure that will potentially significantly lower your taxes.