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 months period —or three consecutive months. This goes for for leisure stays only but only if you have a permanent home at your disposal here.

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

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 the period. This absolute rule however may be interrupted with work stays abroad.

This is from national Danish law. Besides the national legislation comes the 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 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 at the time of 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 in time, you will still be taxed on your gains – but the losses are not deductable.

Example: you may have shares in company XY, that from you relocation date to Denmark are worth DKK 5 million. The first year the gain DKK 1 million in value to 6 million. The second year the values goes down with 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 at DKK 5 million and the sales price at DKK 6,5 million. With proper registrations you are then taxed of a gain of DKK 1,5 million.

However, if your registrations are not correct or not in time, you may be taxed on the two gains, 1 million and 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 is a major problem  – but also regulated with crystal clearness in the Danish Stock Taxation Act.

Get in Touch
At PrivatRevision, we have extensive experience advising on tax residency issues—both for foreign nationals moving to Denmark, and for Danes considering a return (or those wishing to maintain a holiday home or pied-à-terre in Denmark without resuming tax residency).

If you are considering relocation to Denmark and want to understand the tax implications, please feel free to contact us for advice and guidance.