Annual Tax Statements for Foreign Residents in Denmark: Essential Information for Non-Danish Citizens
Living and Paying Tax in Denmark with Foreign Financial Activities
Hey there!
If you're a Danish taxpayer and you've got some dough stashed away abroad, there are some crucial points to keep in mind when checking your annual tax statement, released this week.
Danish Taxpayers Abroad
If you're living or spending more than six months in Denmark, you're responsible for paying taxes on all your income, loans, or assets outside the country. That means they should be reported on your annual tax statement. Even if you've already paid tax in the other country.
Common issues arise from situations like working abroad, owning a foreign bank account, having a holiday home overseas, or owning investments through foreign platforms. It's essential to know that Danish tax authorities don't automatically receive information about these foreign activities, unlike in Denmark where things like salary, home ownership, interest payments, and pension contributions are automatically registered.
According to Henning Boye Hansen, senior consultant at accountancy firm BDO Denmark, young people, in particular, might face problems due to their willingness to explore foreign investment platforms. These platforms often don't inform the Danish Tax Authority, so as an investor, you must register any foreign investments by July 1st and within the year of investing. Failing to do so could lead to some severe consequences.
Tax Deductions and Foreign Investments
Only foreign investments registered with the Tax Authority by the July 1st deadline are eligible for tax deductions on potential losses. There are plenty of horror stories about people who have had to pay tax on money they didn't earn because they didn't register their investment on time.
If you worked overseas in 202x, make sure you include that in your tax statement, too. It applies even if you've already paid tax in the country where you worked.
Owning Property Abroad
If you own property outside Denmark, it's subject to Danish property tax under the same rules as properties in Denmark. However, certain foreign property taxes can be deductible in Denmark, provided they're properly calculated. Hansen warns that some people end up paying too much or too little Danish property tax due to the technical intricacies involved.
Key Takeaways:
- Territorial Tax System: Denmark's territorial tax system generally only taxes income earned within the country. But keep in mind treaty obligations and double taxation.
- Realization-Based Taxation: Corporate investors may opt for realization-based taxation of capital gains on listed portfolio shares (owning less than 10%).
- Compliance and Reporting: Managing your tax records and ensuring compliance can be complex, with increased administrative costs or liability risks if not addressed properly.
- International Jurisdiction and Enforcement: Enforcement actions for unpaid tax can extend beyond Denmark's borders, adding another layer of complexity for taxpayers.
- News about personal finance and taxation in Denmark has highlighted the importance for taxpayers with foreign financial activities to report and register them on time, as failure to do so could lead to severe consequences.
- Danish taxpayers, especially young ones, might face issues when investing through foreign platforms, as these platforms may not inform the Danish Tax Authority, necessitating investors to register any foreign investments by July 1st.
- Foreign investments that are registered with the Danish Tax Authority by the July 1st deadline become eligible for tax deductions on potential losses, and it is essential to understand the intricacies of foreign property taxes for proper calculation of Danish property tax.
- In the territorial tax system of Denmark, income earned within the country is generally taxed, but treaty obligations and double taxation should also be taken into account.
- Corporate investors in Denmark may opt for realization-based taxation of capital gains on listed portfolio shares, in which case they own less than 10%. Understanding these complexities and managing tax records carefully can avoid increased administrative costs and liability risks.
