• Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 8/13/2013

Denmark - Corporate income tax rate reduced to 22% by 2016 

August 13: The Danish Parliament passed two bills that are part of the government's growth plan (known in English as "Growth Plan DK - Strong businesses, more jobs”). Among the measures included in the legislation is a reduction of the corporate income tax rate to 22%, to be phased in over a three-year period.

The current corporate income tax rate (and also the rate for individual income tax subject to the business taxation regime) is 25%. The phased-in reduction of the corporate income tax rate to 22% by 2016 is intended to provide a competitive advantage and to attract investment.

KPMG observation

Tax professionals note that a corporate income tax rate of 22% would generally be considered competitive when compared to the corporate income tax rate in most other European countries. However, according to tax professionals, a reduction in the tax rate cannot stand alone—there must also be reform of other elements of the corporate tax system. In particular, it is thought that a patent tax regime (as in other European countries, such as the UK) would be necessary.

Other legislative measures

  • Payroll tax - The payroll tax rates of financial institutions have been increased to offset the effect of the reduced corporate income tax rate.
  • Hydrocarbon tax - An additional tax will be imposed on profits from hydrocarbon extraction in order to offset the effect of the reduced corporate income tax rate.
  • Tax credit - A request can be made for “payment” or an award of up to DKK 5.5 million (approximately U.S. $100,000) in tax credits by "exchanging" tax losses due to research and development (R&D) activities to cash awards, beginning in tax year 2015. The current maximum amount for this tax credit is DKK 1.25 million
  • Researcher tax regime - Researchers and key employees who have worked abroad for a certain period of time will be subject to a “low-tax researcher regime” when employed by a company for which the individual has previously worked.
  • Gift tax - The rates have been changed.
  • Deferral and installment regimes - Interest rates have been reduced.
  • Capital pension regimes - The current tax rebate regime has been extended to allow capital pensions to be transferred to old-age pensions at a reduced tax rate until the end of 2014.
  • Income tax deduction for home renovations (BoligJobordning) - The program that provides tax deductions for certain home renovation costs has been reintroduced for a two-year period until 31 December 2014, and now also covers “holiday” homes.
  • Health and occupational injury insurance - Self-employed individuals are now entitled to a deduction for contributions to sickness benefit and occupational injury insurance.

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