Important changes to interest and fines collected by the Danish Tax Agency

Any business entity being taxable in Denmark has a tax account with the Danish Tax Agency through which all tax payments are made. The Danish Parliament has recently approved a legislative proposal that will raise the annual interest rate on the tax account from 11.35% to 12.60%.

This change is achieved by increasing the surcharge added to the monthly interest rate from 0.7 percentage points to 0.85 percentage points. The amendment coincides with other significant changes to the Danish Collection Act, including the abolition of compound interest on the tax account and the removal of interest on fines in the tax account.

According to the Danish Tax Minister, the increase in the annual interest rate is intended to counterbalance a potential loss of revenue resulting from the switch from compound interest to simple interest.

However, a minor adjustment to the monthly surcharge – from 0.7 percentage points to 0.75 percentage points – would have been sufficient to address the revenue gap caused by the change in the calculation method. Instead, business entities will face a higher interest rate, making it even more critical for a business entity to monitor its tax account closely. Taxpayers are encouraged to avoid deficits on their tax account to minimize unnecessary interest accruals.

The new interest rate of 12.60% on the tax account will apply from 1 January 2025.

In addition, minor adjustments to one-off fees under the Danish Collection Act and the Tax Control Act have been proposed. These include the following changes which is expected to be effective from 15 January 2025:

The fee for a preliminary income assessment (applied when the Danish Tax Agency estimates taxable income due to a business entity’s delayed filing) is proposed to increase from DKK 800 to DKK 1,400.

• For business entities and individuals required to submit tax returns, the daily penalty for failing to meet deadlines is proposed to double from DKK 200 to DKK 400, with the maximum penalty increasing from DKK 5,000 to DKK 10.000.
   
• For private individuals having a very low income, the daily penalty is proposed to increase from DKK 100 to DKK 200, with the cap rising from DKK 2,500 to DKK 5,000.
   
• For funds and organizations that can fulfill their disclosure obligations by submitting a special declaration, the penalty is proposed to increase from DKK 500 to DKK 1,000.