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Donations for Tax Minimization in Denmark

Donations for Tax Minimization in Denmark

Companies 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 lawyers in Denmark. 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. The tax minimization experts at our law firm in Denmark can provide investors with 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. 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. One of our lawyers in Denmark can offer details on this topic.

Other types of corporate deductions in Denmark

Charitable deductions are not the single type of deductions that are available to companies. Below, our attorneys in Denmark 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: a 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 in Denmark

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. The number of companies is in various business fields reflected by the following statistics: 

  • – in 2016 there were 66,816 companies in the trade and transport sector;
  • – the number of companies in the business services sector in 2016 was 53,054;
  • – 31,973 companies activated in 2016 in the construction sector;
  • – 27.411 companies were in the agriculture, forestry and fishing sector.

Investors who wish to know more about donations made to certain organizations and the tax deductions that can apply to these can contact our law firm in Denmark.