Exit taxation
Are you moving out of Denmark? We help you with exit taxation and other tax issues.
Are you moving out of Denmark? We can help.
It is essential to be aware of the rules regarding exit taxation (exit taxation) when you, as a Dane, move out of Denmark.
Regardless of whether you have many assets in Denmark or almost none at the time of moving out, you must be aware of the rules regarding exit taxation (exit taxation) so that you do not incur tax when moving out of Denmark that you have not budgeted for.
In addition to the rules regarding exit taxation (exit taxation), it is important to be familiar with the rules regarding the cessation of tax liability to Denmark. For example, it is not sufficient to simply move out of Denmark and subsequently not take up residence in Denmark if you want the tax liability to Denmark to cease.
At Friis Legal, we can advise you on both the cessation of tax liability to Denmark and exit taxation (exit taxation) if you are considering moving out of Denmark for a short or longer period. You can click the button below and fill out our contact form if you would like a non-binding discussion of your plans.
Cessation of tax liability
As mentioned above, it is not sufficient to simply move out of Denmark and not reside in Denmark afterwards if you want the tax liability to Denmark to cease.
The rule that deals with when the tax liability to Denmark ceases for private individuals reads as follows: "The obligation to pay income tax to the state in accordance with the rules in this Act lies with persons who are resident in this country" and is found in Section 1, Subsection 1 of the Withholding Tax Act. It is therefore decisive whether you are resident in Denmark.
You could immediately be led to believe that you are not resident in Denmark if you never reside in Denmark. However, it is not quite that simple.
If you have a home available in Denmark, SKAT will still consider that you are resident in Denmark and are thus fully liable to tax in Denmark.
This applies to both rental and owner-occupied homes, as well as in certain cases summer homes, if they are exceptionally considered suitable for year-round residence.
If you want the full tax liability to cease in connection with moving out of Denmark, you must give up your home in Denmark.
If you have an owner-occupied home, this can be done by selling your owner-occupied home or renting it out on terms that mean that the rental agreement is non-cancellable for at least 3 years by the landlord.
On the other hand, if you have a rental home, you must terminate the lease.
It should be mentioned that even if the full tax liability ceases, you may still be subject to limited tax liability in Denmark. For example, if you rent out your owner-occupied home and receive rental income in this connection. Even if you rent it out with at least 3 years of non-termination from the landlord, you are obliged to pay tax on the income that the owner-occupied home generates, as the home is located in Denmark.
Re-entry into full tax liability
In addition to being familiar with the rules for when full tax liability to Denmark ceases, it is also important to be familiar with how to avoid becoming fully liable to tax in Denmark again if you do not want this.
Here it is first and foremost important to point out that after moving out of Denmark, you may not stay in Denmark for more than 3 months in a row or for more than 180 days within a period of 12 months if you acquire a year-round residence in Denmark again after moving out and still do not wish to be subject to Danish tax liability.
You also become liable to tax in Denmark again if you take up residence in Denmark for a period of 6 months, even if you do not have a full-time residence in Denmark. Short holiday stays abroad within this 6-month period are included in the period and thus do not interrupt the stay for tax purposes.
In addition, it is important that you do not work when you are staying in Denmark. The full tax liability does not arise from the individual performance of work while you are staying in Denmark, but if the work is not in the nature of the individual performance of work tasks, this will be the case. Therefore, you must be very careful about performing work tasks while you are staying in Denmark. On the other hand, if you are staying in Denmark for a shorter time than the periods specified above, and the stay is in the nature of a holiday, then there is nothing to prevent you from staying in Denmark without the full tax liability arising.
Exit tax
Exit tax is the term for the tax that is triggered on certain assets when you move out of Denmark, even if you do not sell these assets and thus make a profit.
A good example of exit taxation (removal taxation) is the taxation that takes place on the share portfolio of the person moving out. If you have a share portfolio worth DKK 200,000, which is DKK 100,000 more than the value of the shares at the time of acquisition, then share capital gains taxation is triggered on the increase in value (DKK 100,000) on the date of moving out. This happens regardless of whether you keep the shares and thus have not realized the profit on the purchase of the shares. It should be noted that exit taxation (removal taxation) only takes place if the share portfolio has a value of or more than DKK 100,000.
Another example of exit taxation (taxation on departure) is the taxation that takes place on Danish companies. If you are the owner of an ApS that SKAT assesses to have a value of 10 million DKK, then at the time of departure you will trigger an exit tax on the value added that the company has had since it was established, even if the owner of the company does not sell the company. In this case, this will mean that in rough figures there will be an exit tax of 42 percent of approximately 10 million DKK.
It is worth mentioning in this context that you can request SKAT to defer the payment of the exit tax.
Concrete advice
The above review is intended to provide an overall insight into the tax law conditions that apply if you want to leave Denmark for a shorter or longer period. There are of course several conditions that you need to be aware of when it comes to exit taxation and cessation of full tax liability. The overview will therefore not be able to replace specific tax advice if you want to leave Denmark.
At Friis Legal, we assist clients with tax advice in connection with leaving Denmark, especially if you want to move to Dubai. You are therefore welcome to contact us by sending an email or filling out our contact form under "CONTACT US" if you would like a non-binding conversation.
What we help with
Understand your tax obligations and options
Ensures correct termination of full tax liability
Avoid unexpected exit taxation
Handling temporary stays in Denmark
Why is it important to understand exit tax?
Exit taxation is a tax on the value of assets, even if you don't sell them. This can hit you harder than you expect.
Stock portfolio
For stock portfolios of more than DKK 100,000, you must pay tax on the increase in value.
Company shares
If you own unlisted shares in companies, this can trigger significant exit taxation.
How we help you
Analysis of your situation
We review your assets and tax situation
Identifies risks
We find potential tax traps and challenges
Development of strategy
We prepare a tailored plan for your exit
Implementation
We help with the practical implementation
Frequently asked questions
When is exit taxation triggered?
Exit taxation is triggered when you move from Denmark and have assets above certain thresholds.
Can I get a deferral of the payment of exit tax?
Yes, you can request a deferral of exit tax payment under certain conditions.
How does my tax liability to Denmark cease?
Tax liability does not automatically cease upon moving. You must meet specific requirements regarding residence and connection to Denmark.
How long can I visit Denmark?
As a non-resident, you may stay for a maximum of 3 consecutive months or 180 days within 12 months. Please note that the number of days is calculated in a special way.
How am I taxed as an expat in Dubai?
There is no income or share tax in Dubai.