Moving to Denmark

Home at your disposal

As a general rule, you become fully tax liable if you maintain a residence and spend more than 180 days in Denmark within a 12-month period, or three consecutive months. This applies only to leisure stays and only if you have a permanent home here.

If you perform work in Denmark and have access to a residence (including a home owned or rented by a spouse or other family member), tax liability is triggered immediately when you arrive. Failure to declare and pay Danish tax thereafter constitutes a criminal offence.

The absolute rule

Additionally, Denmark applies an absolute rule: if you spend more than 183 days in the country within a year, you become fully tax liable—regardless of whether you have a home in Denmark at your disposal, and even if you make short trips abroad during that period. However, this absolute rule may be interrupted by work stays abroad.

These rules follow from Danish national legislation. In addition to the national law, Denmark is also bound by international bilateral agreements to avoid double taxation, the DTAs.

Interaction with double taxation treaties, DTAs

If Denmark has entered into a double taxation treaty with the country from which you are moving, the treaty provisions will also determine how taxing rights are allocated between the two states. If there is a discrepancy between Danish domestic rules and the treaty, taxpayers may, in some cases, choose whether to rely on domestic law or the treaty.

In practice, it is sometimes possible to plan the precise timing of when Danish tax residency is triggered. In other cases, the outcome is more straightforward. Much depends on whether there is a strategic interest in becoming tax resident—or in avoiding such residency.

Entrepreneurs and business owners

For entrepreneurs and business owners, the risk of unintentionally becoming fully tax liable in Denmark is particularly high. This is often a matter of fine distinctions—for example, a British citizen residing in the UK but visiting a spouse in Denmark every other weekend may inadvertently trigger Danish tax residency. Frequent challenges arise in determining when “residence” and “stay” occur, and how much business activity can be conducted in Denmark before tax liability arises.

Once you become fully tax liable in Denmark, your worldwide income is taxable here.

Entry-registration

A key step in the relocation process is determining the “entry value” of your taxable assets. For example, if you purchased shares in Spain years ago for DKK 1 million and they are worth DKK 5 million upon moving to Denmark, it is crucial to register this value upon entry. When you later sell the shares (or leave Denmark again), Danish tax will apply only to the gain accrued during your period of Danish residency. If you sell them for DKK 7 million after one year in Denmark, Danish capital gains tax would apply to DKK 2 million—not the full DKK 6 million gain.

Proper registration of entry values is equally important in connection with exit taxation, as you will be taxed on the “exit value” of your assets when leaving Denmark again.

Furthermore, if you do not register correctly and on time, you will still be taxed on your gains, but any losses will not be deductible. Example: you may have shares in company XY that, from your relocation date to Denmark, are worth DKK 5 million. The first year, the gain was DKK 1 million, bringing the value to 6 million. In the second year, the values go down by 1 million, and the shares are once again worth DKK 5 million. In year three, the shares gain DKK 1,5 million in value, making them worth DKK 6,5 million. Then you sell them.

Most people would probably agree that your gain since relocating to Denmark is the difference between the entry price of DKK 5 million and the sale price of DKK 6,5 million. With proper registrations, you are then taxed on a gain of DKK 1,5 million.

However, if your registrations are not correct or not made in time, you may be taxed on the two gains, DKK 1 million and DKK 1,5 million, without the right to deduct the loss from year two. The result is a taxable income of DKK 2,5 million.

This example illustrates a major problem – but also regulated with crystal clarity in the Danish Stock Taxation Act.