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Donations for Tax Minimization in Denmark

Updated on Monday 05th August 2019

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Donations-for-Tax-Minimization-in-Denmark.jpgInvestors who open a company in Denmark are able to enjoy a number of tax deductions, including for charitable contributions to which they choose to donate, and which are organizations that are approved by the tax authorities in the country. 
 
The deductibility of payments continuously made to charitable associations is often capped and in some cases, a minimum amount is also imposed (the minimum amount can also apply to each cultural institution to which the donation is made; for example, a minimum of 500 DKK annually).
 
Understanding the principles of donations for tax minimization in Denmark is simplified when investors choose to work with our team of Danish company formation agents. Together with our tax specialists, corporations, as well as individual investors, can plan their annual donations to fit their charitable intentions and to be able to make the possible deductions. 
 
Charitable contributions made by companies in Denmark
 
Depending on the business field in which they activate, companies in Denmark have access to a number of deductions for their expenses. While not all companies may qualify for research and development deductions, as they are not involved in this business field, making charitable contributions is usually suitable for businesses.
 
Some of the conditions for donations for tax minimization in Denmark include the following:
 
  1. Approved organizations: the company can make a gift to an organization that is approved by the Danish tax authorities; our attorneys in Denmark can provide more details.
  2. Limited deduction: it is common in many countries, not only in Denmark, for this deduction to be capped; this is limited to 16,300 DKK in 2019.
  3. Cultural organizations: in some cases, companies can deduct the gifts made to some cultural organizations that are supported by the government or municipality; no value limit applies in this case.
  4. Research funds: the company can make a charitable gift to a Danish or EU company provided that the company receiving the contribution uses it for research purposes.
 
For the final point, there is no limitation on the amount applicable for the gifts made to charitable organizations that will use the funds for research. However, the deductibility is conditioned; the Danish tax authorities must approve the company receiving the gift. 
 
As seen from the information above, an important issue to take into consideration when selecting the organization towards which the charitable donation will be directed is that the Danish tax authorities approve it. Investors can reach out to our agents who specialize in  company registrationin Denmark more information on the list of approved organizations. 
 
Charitable contributions made by individuals in Denmark
 
Individuals earning income in Denmark can also deduct charitable contributions. Foreign investors in the country may be interested in this when they derive income from real estate or other sources, not only when they open a company in Denmark. Like in the case of companies, the donations need to be submitted to approved charities, foundations or institutions. 
 
The maximum charitable contributions for personal deduction purposes is 16,300 in 2019, just like in the case of companies. This limit applies regardless of the fact that the donor makes them to more than one organization. 
 
Other types of corporate deductions in Denmark
 
Charitable deductions are not the single type of deductions that are available to companies. Below, we list some of these:
 
  • Deductions for R&D expenses: an increase in the deduction for research and development expenses is applicable in Denmark; for 2019 it is 101.5%.
  • Payments to foreign entities: investors who open a Danish company can claim deductions for management fees, royalties and similar fees paid to foreign affiliates (when they reflect the received services).
  • Bad debt: companies can, in some cases, deduct a loss on bad debt (not on inter-company debt).
  • Certain purchases: the purchase of goods for resale, the purchase of tools, equipment, machinery, and others.
  • Certain services: companies may deduct expenses for the telephone and internet and for the fees for accountants and lawyers.
 
Private expenses cannot be deducted. These are those that are bought through the business and used for private purposes.
 
Denmark is a country that offers a favorable business and taxation regime. We list the most important taxation highlights below:
 
  • - the usual corporate income tax rate is 22%.
  • - Danish companies in the gas and oil industry are subject to a tax of 25%.
  • - employres pay an annual social security contributions per employee of approximately 10,000 - 12,000 DKK.
  • - some business property can be subject to a tax of 1% of the building's value.
 
Investors who wish to know more about donations made to certain organizations and the tax deductions that can apply to these can contact our Danish company formation specialists.

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