High-Tax Country Resident Planning To Stay Put: 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.

Residence applies to individuals who:

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

Resident individuals are taxed on their worldwide income; income is defined to include many types of capital gain.

Income tax applies both at national level and at local level. The basic national tax rate is 15%, payable on income above DDK347,200. There are lower rates of 5.04% and 6% on tranches of income below DDK347,200 (these are to be consolidated into one rate in 2010) and they are added to the 15% rate, giving a total of 26% on higher incomes. Local income tax applies at rates between 22.7% and 27.8% depending on the district. The highest marginal rate of income tax is 59%. Some types of investment income are taxed separately at rates between 28% and 45%.

There are personal allowances, normally of DDK42,900. Most types of pension contributions are deductible, but there is a limit of DDK46,000 per annum in some circumstances..

Employed individuals pay social security taxes of about 8%. Private pension contributions are tax deductible up to EUR5,165 per annum.

There is no Alternative Minimum Tax in Denmark, and no wealth tax.

Stamp duty of 6% applies to real estate acquisitions, and there are municipal real estate taxes of between 1% and 3%.

Inheritance taxes apply to Danish residents at 15% for family members and 40% for others.

NB: Danish tax rules are considerably more complicated than the above simplified summary, and professional advice on the situation of any particular individual is a necessity.

The Danish holding company regime is quite benign, and it is possible to make foreign investments on a beneficial basis through the use of such a company, although there are limitations which apply to holdings in low-tax jurisdictions. Danish residents must make an annual declaration of overseas assets.

For an individual wishing to explore the investment opportunities further afield, www.lowtax.net contains details of the investment and tax regimes for 50 offshore jurisdictions.

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.