Taxes in Denmark: full tax guide for Americans

Denmark is renowned for its high quality of life, robust social welfare system, and progressive culture. However, these benefits are accompanied by a complex and high taxation system. According to Tax Foundation, Denmark has the highest statutory personal income tax rate in Europe and one of the highest in the world, reaching 55.9%.

For Americans residing in Denmark, understanding taxes in Denmark is crucial to optimize their financial well-being, particularly since US citizens and Green card holders are required to file US taxes too.

This guide will help Americans expats navigate Danish expat tax and ensure compliance with both Danish and US tax laws.

Overview of Denmark's taxation

Denmark operates a progressive tax system, meaning that tax rates increase with higher income levels. The Danish tax system supports the country's extensive welfare programs and is structured to ensure a redistribution of wealth from higher to lower earners.

Denmark’s tax system is managed by the Ministry of Taxation and affiliated government agencies, including the Danish Tax Agency (Skattestyrelsen, SKAT).

Taxes are the primary revenue source for Denmark’s public sector, contributing nearly DKK 1,000 billion annually.

The tax burden is composed of direct taxes (e.g., state and municipal income taxes) and indirect taxes (e.g., VAT and excise duties).

Who is considered a tax resident in Denmark?

Tax residency in Denmark is determined by two main factors:

Duration of stay – Individuals residing in Denmark for more than six consecutive months are considered tax residents. Short absences for travel or vacations do not affect this status.

Permanent home – If an individual owns or leases a home in Denmark that is available for continuous use, they may be classified as a tax resident, regardless of their actual time spent in the country.

Danish income tax rates 2025

Denmark's income tax rates vary based on income level and municipality. The state tax applies uniformly across Denmark, while municipal taxes differ by location.

State tax is divided into bottom-bracket tax (12.01%) and top-bracket tax (15%, applies to income above a specific threshold)

Municipal tax varies by region. For instance, the 2025 municipal tax rate in Copenhagen is set at 23.50% whereas in Brønderslev, it’s 26.30%. See local government personal taxation by tax rate here.

Consult the table below for key tax rates in Denmark:

Source: skat.dk.

Other taxes in Denmark

Labor market tax

A mandatory 8% labor market contribution (am-bidrag) is deducted from gross income to finance employment-related benefits such as unemployment aid, maternity/paternity leave, and sickness benefits. Normally, employers deduct these contributions from their employees’ pay.

Church tax

Individuals registered with the Evangelical Lutheran Church in Denmark are subject to church tax, which ranges between 0.4% and 1.5% of taxable income.

Pro tip. Contributions to other religious organizations may be tax-deductible.

Special expatriate scheme

Denmark offers a special tax scheme for qualifying researchers or highly-paid employees recruited under section 48E of the Danish Withholding Tax Act (Kildeskatteloven).

This scheme allows expats to be taxed at a flat rate of 27% on employment income for a limited period.

Value added tax

Denmark applies a 25% value added tax (VAT) on most goods and services, making it one of the highest VAT rates in the EU.

This tax is typically included in the retail price, affecting the overall Denmark tax rate and cost of living.

Inheritance and gift taxes

Denmark imposes taxes on inheritances and gifts, with tax rates and exemptions varying based on the relationship between the giver and the recipient.

In 2025, the tax-free gift limit for close relatives is set at DKK 76,900, while for a daughter-in-law, the exemption is DKK 26,900.

Any amount exceeding these thresholds is subject to taxation according to Danish tax regulations.

Property taxes

In Denmark, property owners are required to pay two types of property tax: property value tax and land tax.

• Property value tax is a state tax levied on the assessed value of a property, including both land and buildings. This tax applies to homeowners who reside in their property, while rental property owners are exempt and only pay land tax. The tax is calculated as a percentage of the publicly assessed property value, with a 20% reduction applied.
• Land tax (also referred to as property tax) is determined based on the value of undeveloped land—land without buildings.

This tax is collected by the local municipality and varies depending on the assessed land value.

For more information on property value tax and land tax in Denmark, visit Skat.dk.

Capital gains tax

Capital gains are taxed at 27%-42%, depending on the gain amount.

If you are married and you live with your spouse at the end of the income year, the threshold amounts are twice the above.

Corporate tax

Denmark applies a corporate tax rate of 22% (2025) on the profits of companies operating within its jurisdiction.

In addition to corporate tax, businesses may be required to pay VAT on goods and services, along with other applicable duties. Employers are also responsible for payroll-related taxes, such as A-tax (income tax withheld at the source) and labor market contributions.

Many business-related expenses are tax-deductible, reducing overall tax liability. In some cases, companies may also qualify for tax refunds based on specific deductions and incentives.

Pension plan growth tax (PAL tax)

Returns on pension savings are subject to a 15.3% tax, known as the PAL tax. This tax is typically withheld by the pension institution managing the funds.

Social security

Denmark's social security system is predominantly funded through general taxation. However, employees contribute a nominal amount to specific schemes, such as the Supplementary Labor Market Pension (ATP), with contributions typically deducted directly from wages.

When to file a tax return in Denmark

Denmark’s tax system is largely automated, and most taxpayers receive a pre-filled return (årsopgørelse) from SKAT in March. If information is incorrect or incomplete, you must update it in the tax agency’s system before May 1st.

If you’re required to file a tax return in Denmark, the standard tax return deadline is May 1 of the year following the tax year. You can also request an extension until July 1.

Taxpayers with complex finances, self-employed individuals or those with foreign income, may need to provide additional documentation.

Americans abroad must file their US tax return with the Internal Revenue Service (IRS) in addition to their income tax return in Denmark, if applicable.

The tax treaty between the US and Denmark

The United States and Denmark have established a tax treaty to prevent double taxation and provide clarity on tax obligations for expats. The tax treaty determines which country has the primary right to tax various types of income, such as salaries, dividends, and capital gains.

It also includes provisions for tax relief, such as foreign tax credits and exemptions, helping individuals avoid being taxed on the same income in both countries.

Totalization Agreement between the US and Denmark

To address the issue of dual social security taxation, the US and Denmark also have a Totalization Agreement in place. This agreement ensures that workers do not have to pay social security taxes to both countries on the same earnings, preventing financial burdens.

It also helps determine which country's social security system applies based on factors such as the length of employment and residency.

Most popular tax forms for US expats

US expats in Denmark may need to file several tax forms, including:

• Form 1040 – The standard income tax return required for all US citizens, regardless of location. The typical filing deadline is April 15, but expats receive an automatic extension to June 15.
• Form 8938 (FATCA report) – Required if foreign assets exceed $200,000 on the last day of the tax year or $300,000 at any point ($400,000 and $600,000 for married taxpayers filing jointly).
• Form 2555 (Foreign Earned Income Exclusion – FEIE) – Allows expats to exclude up to $126,500 (2024 limit, adjusted annually) of foreign income from US taxes.
• FBAR (FinCEN Form 114) – Required if the combined value of foreign bank accounts exceeds $10,000 on any day during the tax year. It must be filed separately from your tax return.

Denmark tax forms for US expats

We recommend consulting Danish tax authorities to ensure you're completing all necessary forms accurately and timely.

Find some of the most commonly used by expats Danish tax forms below:

• Form 04.003 EN (tax return) – This form should be used by self-employed individuals to declare their annual income or by those whose tax situation requires that they use a tax return form to declare their income.
• Form 04.012 EN (tax return for foreign Income) – Use this form if you have income from non-Danish sources. The form can be completed online through the Danish Tax Agency's E-tax system (TastSelv) or submitted by mail.
• Form 01.016 (application for exemption from Danish withholding tax) – If you plan to leave Denmark or have specific income types that may qualify for tax exemption under a double taxation agreement, you should submit Form 01.016.

Are you a US expat living in Denmark or planning to move there? Let Taxes for Expats take the stress out of managing your US tax obligations. You can trust us – we've been preparing taxes for Americans in Denmark for over 20 years. We offer customized advice to ensure you're well-informed and compliant with your tax responsibilities.

If you need a US tax accountant, our experienced team is ready to assist. Schedule your initial consultation today and let our experts guide you through the process with confidence.