Denmark's Tax System and Structure in 2025

Denmark maintains a well-organized tax framework that categorizes levies into two primary types: direct and indirect taxes. Direct taxes encompass corporate income tax, personal income tax, labor market contributions, church tax, property value tax, and real estate tax. Indirect taxation includes value-added tax (VAT), customs duties, green taxes, and excise duties. Corporate taxation follows a territorial principle, distinguishing between resident and non-resident entities. Resident companies are taxed on all income derived from Danish territory, ensuring comprehensive fiscal oversight.

For detailed information on corporate filing timelines and procedures, refer to Section 6.4 of this guide titled 'Tax Filing Procedures for Businesses in Denmark'.

Key Tax Legislation Affecting Corporations

Major legal frameworks include the Value Added Tax Act and the Act on Avoidance of Double Taxation. Individuals seeking detailed guidance on personal tax obligations can visit the official website of the Danish Tax Authority at skat.dk.

Major Taxes and Applicable Rates in Denmark

Denmark is known as a high-tax nation, with overall tax burden reaching approximately 50% of national income. In 2022, total tax revenue reached 1,199.6 billion DKK, with personal income tax alone accounting for 64.5% of that amount—highlighting its central role in public financing.

Personal Income Tax in Denmark

The Danish personal income tax system applies progressive rates to both wage earnings and capital gains. Local municipalities may set varying rates, leading to regional differences. The top marginal rate can reach up to 55.79%, depending on income level and location. Below is an overview of the tax structure in Copenhagen:

Progressive Tax Rates for Earned Income in Copenhagen

Income up to 48,913 DKK is taxed at 8%. Earnings between 48,913 DKK and 521,304 DKK are subject to a 41% rate. Any amount exceeding 521,304 DKK faces a steep 55% tax rate.

Capital Gains Tax Rates in Copenhagen

Capital gains up to 45,000 DKK are exempt from taxation. Gains ranging from 45,000 DKK to 479,600 DKK are taxed at 36%, while amounts above 479,600 DKK incur a 51% rate.

It’s important to note that actual tax liability depends on multiple factors such as marital status, commuting distance, household composition, and employment type. For personalized estimates, taxpayers are encouraged to use tools available on the Danish Tax Agency’s portal: skm.dk/skattetal.

Value-Added Tax (VAT) in Denmark

VAT in Denmark operates similarly to systems in countries like China, where businesses calculate tax as the difference between output VAT on sales and input VAT on purchases. The standard VAT rate is 25% applied to the price of goods or services. Certain sectors such as transportation, accommodation, and cultural events may qualify for reduced rates, though these remain limited in scope.

Corporate Income Tax

As of 2025, the corporate income tax rate in Denmark stands at 21%, which remains below the European Union average. This competitive rate supports business investment and economic growth, making Denmark an attractive destination for international enterprises.

Digital Services Tax

While Denmark has expressed support for taxing digital economy activities, no standalone digital services tax has been implemented. Following the European Union’s decision in July 2021 to delay the EU-wide digital tax initiative, Denmark continues to align with broader OECD efforts under the BEPS 2.0 framework rather than introducing unilateral measures.

Carbon Tax and Green Fiscal Reform

Denmark was among the first countries globally to introduce a carbon tax. To meet ambitious climate goals outlined in its Climate Action Plan, the government launched a green tax reform in June 2020. This includes increased levies on CO₂ emissions, incentives for renewable energy adoption, and targeted subsidies for sustainable agriculture and clean transportation.

Special Economic Zones and Free Trade Areas

Denmark does not have designated special economic zones with unique tax incentives. However, the Copenhagen Free Port serves as the country’s only bonded warehouse zone, integrated within the larger Port of Copenhagen–Malmö region. It offers logistical advantages and temporary duty deferral for imported goods, supporting trade efficiency.

Administrative Regions and Autonomous Territories

Denmark’s five main administrative regions do not operate under separate tax laws. However, its autonomous territories—Greenland and the Faroe Islands—have their own legislative bodies and taxation systems. Both welcome foreign investment and offer distinct regulatory environments. Investors should consult official sources such as Greenland’s Self-Government website and the Faroe Islands Government portal for jurisdiction-specific details.

SailGlobal provides comprehensive offshore human resource solutions for companies expanding into Nordic markets, including payroll compliance, expatriate tax advisory, and cross-border employment structuring.