High-Tax Country Resident Planning To Go Offshore: Denmark

If you are resident and domiciled in Denmark (which will be the normal situation for a native-born Danish individual) then you are taxable on your world-wide income and capital gains. There is no wealth tax, but inheritance tax applies.

Many resident individuals will be participating in domestic Danish tax-privileged savings and investment instruments, and usually these can simply be discontinued on leaving without serious tax penalties.

Residence applies to individuals who:

• spend more than 183 days in the country; or
• have habitual residence in Denmark.

In order to lose tax residence it is simply necessary to stop fulfilling any of the above criteria in a given tax year.

Denmark has an exit tax which applies to gains made on shareholdings.

For an individual who knows she is going to leave Denmark, there is a case for switching income-generating assets into capital appreciation assets to a country outside Denmark, or at any rate for ensuring that gains are not made during Danish residence which could incur capital gains tax or could become liable to the exit tax. Gains which crystallise after residence has finished will escape Danish tax.

Once Danish residence has been terminated, and if non-residence is expected to be permanent, then an ex-Danish resident is free to invest offshore in order to obtain the best possible returns.

Once a definite decision to move offshore has been made, careful thought should also be given to existing Danish capital assets, including pension assets. Will it be possible to move them offshore without incurring capital gains tax? Is it desirable to move them early and pay the tax anyway? These are complex questions, and the answer will depend on individual circumstances, but for many individuals there will be interesting tax planning possibilities.

www.lowtax.net contains extensive information on the investment, tax and legal regimes in 50 of the main offshore jurisdictions. Further information is available in our Investment Information Providers Section, and the four main types of offshore investment are described in the Guide to Offshore Investment on this site.

NB: The suggestions given above do not constitute investment advice. They are intended only to assist individuals in finding appropriate professional advice, which is essential for anyone planning offshore investment.