Taxation of Foreign Pensions
If you have a foreign pension, it is usually because you have worked and lived abroad. Beyond regular taxation, it is important that your pension is properly registered when moving to Denmark, as this affects potential future taxation.
Tax obligations in Denmark
When you are a full tax resident in Denmark, your foreign pensions are generally subject to Danish taxation. However, there are many exceptions and modifications to be aware of:
- In many cases, payments from foreign pensions are not taxed in Denmark.
- In other cases, Danish taxation may be limited, while in some situations, the pension must be taxed.
Key factors affecting taxation
- Is the pension from public or private employment, or is it a social pension?
- If public employment, what did you do?
- Was a tax deduction allowed on contributions?
- Has there been a roll-over?
- Can ongoing returns or value growth be taxed in Denmark?
- Double taxation agreements vary depending on the country where the pension is held.
- Other factors include citizenship, position, and type of pension savings.
Complexity of taxation
Taxation of foreign pensions is complex because it involves:
- Taxation in Denmark.
- Taxation in the source country.
- The applicable double taxation agreement between Denmark and the source country.
Additionally, the value growth of pensions, even from already taxed contributions, can be taxable in Denmark. Many are surprised that year-to-year changes in pension value may be taxable, even if tax-free in the source country.
American Pensions
At PrivatRevision we have extensive experience with taxation and optimization of taxation on foreign pensions. Please note, the especially American pensions may be treated very reasonable when combining the national Danish law with the DTA between Denmark and the United States. We have had numerous of principle case with the National Tax Council and the National Tax Tribunal on foreign and especially on American pensions.
Our experience
At PrivatRevision, we have assisted in numerous cases regarding the taxation of foreign pensions. Several of our cases have contributed to shaping the current practice and interpretation of these rules.