Danish government’s planned legislative program on tax for 2024/2025

To bolster entrepreneurship in Denmark, the minister proposes several key initiatives. A very important proposal is the abolition of dividend tax on tax-free portfolio shares (i.e., holdings of less than 10 % of unlisted shares). Currently, while gains or losses from the disposal of such shares are excluded from taxable income, dividends are taxed, with 70 % of the dividend amount included in the recipient company’s taxable income being taxed with 22%. Eliminating the dividend tax will make these investments more attractive for both domestic and foreign investors, thereby enhancing entrepreneurs' access to capital. If implemented, dividends from unlisted shares are tax exempt no matter the size of ownership.

Additionally, the minister suggests making it possible for companies to opt for a seven-year period after an initial public offering (“IPO”) where capital gains are only taxed upon realisation. Under the current mark-to-market principle for companies that holds listed shares in a company and where the holding is less than 10%, companies are taxed on unrealized gains or losses at the end of the income year, even if the shares have not been sold. After the 7 years the mark-to-market principle will again be applicable. The new measure will allow companies a longer window to manage such taxes, thus facilitating investments and growth during critical early years.

The Minister proposes increasing the tax deduction for research and development (“R&D”) costs. The current deduction rate is 108% (as of 2024), with a goal to increase it to 120% by 2028, subject to a DKK 1 billion cap. The increase will be gradual, with the deduction rate rising to 114% in 2026 and 116% in 2027. For R&D expenses that exceed the DKK 1 billion cap, the deduction will remain at 110% from 2026 onward, without further increments. 

Also, the possibility for businesses with a tax loss to receive a payment of negative tax as a loan calculated as 22 % of the R&D costs - a tax credit – is improved. Where now, such loan can maximum be calculated on costs of MDKK 25, the maximum amount will be increased to MDKK 35 in 2027, making it possible to receive a loan of up to MDKK 7.7.   

It should be mentioned that case law on when the tax deduction and tax credit for R&D costs are relevant has generally been tightened within the resent years and is not very clear making it difficult for the businesses to make use of the rules. Hopefully it will become clearer going forward. 

Today tax losses carried forward can be offset against positive income up to the threshold of approximately MDKK 9.5. Exceeding this threshold, carried-forward losses can only be deducted by 60% of the portion of the year's taxable income. Any additional losses can be carried forward indefinitely. This rule applies collectively to jointly taxed companies and the threshold is adjusted annually. It is suggested that the MDKK 9.5 will be increased to MDKK 20 improving the ability to offset carried-forward losses for companies with high investment costs, for example. 

For share schemes according to section 7P of the Danish Tax Assessment Act (Da. Ligningsloven) it is suggested to expand the employee share scheme for new, smaller companies. This is suggested done by abolishing the limit of 50% on the proportion of salary that new, smaller companies can offer as employee shares not being taxed as personal income and replacing it with a requirement for a base salary for these employees. Additionally, it will be investigated if it is possible to introduce a simplified valuation method for employee shares when they apply other rules for granting employee shares.

To align with changes to Directive 2011/16/EU, the minister plans to enhance transparency and administrative cooperation regarding crypto assets. The amendments primarily address reporting and the automatic exchange of information on income from crypto asset transactions. Providers of such assets will be required to meet stringent reporting and due diligence standards, and EU-member states will automatically exchange this information with each other.

Moreover, the Minister proposes adjusting the tax treatment of gains and losses on crypto assets, aiming to simplify tax calculations for individuals and ensure proper tax compliance.

Other proposed amendments aim to bring Danish tax laws in compliance with OECD standards. This includes updates to Denmark’s minimum taxation regulations to align with OECD administrative guidelines, as well as revisions to transfer pricing rules, including reducing documentation requirements.

The proposal also includes a revised version of the Øresund Agreement (Da. Øresundsaftalen) between Denmark and Sweden, with the goal of reducing administrative burdens on cross-border commuters and their employers and simplifying the existing tax rules.

Finally, the minister is expected within the next days to suggest reducing the estate and gift tax on transfers of family-owned businesses from 15% to 10%. In addition, a standardised valuation scheme for businesses is planned to be introduced to standardize the calculation of this tax base. The upcoming proposal should also expand the possibility of transferring real estate businesses with succession (tax deferral). Please see our article on this specific matter here (link to newsletter regarding Improved conditions for family transfers).