Written by: TaxDAO
1. Introduction
In recent years, with the rapid development of the crypto asset market and the deepening of the international community's understanding of crypto assets, governments and financial institutions' attitudes toward crypto assets have gradually evolved. Initially, the Danish Bank held a negative stance on crypto assets, advising clients against engaging in cryptocurrency investments to avoid promoting money laundering and other financial illegal activities. However, over time, Denmark has gradually shown a more accepting attitude toward crypto assets.
The Danish tax law committee recently proposed that from 2026, unrealized gains and losses from cryptocurrencies will be subject to taxation, aiming to align the cryptocurrency tax system with existing regulations for other investment products such as stocks and bonds. This article will introduce Denmark's crypto tax and regulatory system to help readers better understand the current cryptocurrency asset policies in Denmark and their transformation background.
2. Overview of Denmark's Basic Tax System
2.1 Denmark's Tax System
Denmark is a typical developed country with high taxes and high welfare. According to the statistics from the Organization for Economic Cooperation and Development (OECD), Denmark ranks first among member countries in terms of the proportion of taxes to its GDP, reaching about 46.3%. The legislative role in Denmark's tax system is played by the Parliament, and all tax laws can only take effect and be published after receiving the signatures of the Queen and at least one cabinet minister. Tax administration is the responsibility of the Danish Tax Ministry, which oversees several functional agencies, the National Tax Tribunal, and the National Tax Management Center (SKAT). Notably, Denmark's autonomous territories—Faroe Islands and Greenland—enjoy independent tax systems and are not subject to the tax system of mainland Denmark.
Denmark's tax system is similar to the Italian tax system previously introduced; both tax systems are primarily divided into two main categories: direct taxes and indirect taxes. In Denmark, direct taxes refer to taxes deducted directly from the taxpayer's income, covering corporate income tax, personal income tax, labor market supplementary tax, church tax, property assessment tax, and property tax. Indirect taxes are the taxes paid by taxpayers when purchasing goods or services, mainly including value-added tax, customs duties, carbon taxes, and excise taxes.
2.2 Major Types of Taxes in Denmark
2.2.1 Personal Income Tax
In Denmark, any individual residing for more than 6 months is required to fulfill tax obligations to the Danish government. For individuals residing in Denmark, they bear comprehensive tax responsibilities. Generally, individuals are required to pay state tax, municipal tax, labor market tax, and church tax. Denmark implements a progressive tax rate system for personal salary income and capital gains, and this tax rate may vary depending on the city of residence, with the highest tax rate level reaching 52.07%.
(1) State Tax: Adopted a progressive tax system, divided into minimum tax and maximum tax levels, based on personal income. The calculation of the minimum tax base is based on personal income plus positive net capital income. In 2024, the minimum tax rate corresponding to this tax base is 12.01%. For single individuals, the maximum tax base is also composed of personal income plus positive net capital income. However, when calculating the maximum tax, 8% of the labor market tax is first deducted, and then a 15% tax rate is levied on the portion exceeding 588,900 Danish kroner (2024 standard).
(2) Municipal Tax: Local income tax, also known as municipal tax, is calculated based on taxable income and adopts a uniform tax rate, which varies depending on the city of residence. According to 2024 data, the average municipal tax rate nationwide is approximately 25.067%.
(3) Labor Market Tax: The tax rate is 8% of personal income.
(4) Church Tax: The church tax is levied at a uniform tax rate, which varies depending on the city of residence. The average church tax across Denmark is about 0.65% in 2024. This tax is collected by municipal authorities but is only applicable to members of the Danish National Church (i.e., the Lutheran Church). When registering in Denmark, each individual must clearly indicate whether they should be subject to church tax collection.
(5) Share Tax: According to Denmark's regulations on share income in 2024, if the amount of share income does not exceed 122,000 Danish kroner (this standard applies to married couples), it is taxed at a rate of 27%. Once share income exceeds this amount, the tax rate on the excess portion will increase to 42%.
(6) Other Taxes: This mainly applies to foreigners, such as scientists working in Denmark or dispatched to Denmark, who can apply for a unified tax rate of 27% on their total salary, which can last for up to 84 months, but there are many recognition conditions. Additionally, the 27% uniform tax rate does not cover all income, but is calculated based on cash salary, employer-provided telephone/internet services, taxable value of company cars, and taxable health insurance paid by the employer. All other income outside this scope will be taxed according to regular tax rules. Notably, no deductions are allowed from income subject to the uniform tax rate. Furthermore, after exceeding 84 months, income will no longer enjoy the benefits of the uniform tax rate but will be taxed at ordinary rates.
2.2.2 Corporate Income Tax
According to Danish tax law, any company registered in Denmark is considered a Danish tax resident, meaning all its income must be subject to taxation. The corporate income tax rate for ordinary businesses in Denmark is 22%, but only depreciation and expenses directly related to the company's operations are allowed to be deducted from taxable income. When determining taxable income, the portion of tax exemptions and tax-depreciated amounts must first be deducted from the total income of the company. Notably, since operating costs and depreciation can be deducted from the tax base, the actual tax burden for companies may be lower than the statutory 22% tax rate.
Additionally, according to Danish tax law, the tax treatment for foreign permanent establishments (PE) and real estate follows a territorial principle. This means that Danish companies are not taxed on their income worldwide. Instead, income derived from permanent establishments outside Denmark or foreign real estate is not included in Denmark's taxable income. For non-resident companies, only profits derived from income obtained within Denmark are subject to taxation. The corporate income tax rate is set at 22%.
2.2.3 Value-Added Tax
Denmark levies value-added tax (VAT) on goods and services sold and imported within the country, with a standard tax rate of 25% of the price excluding tax. However, exported goods and services are exempt from tax. In addition, Denmark also implements VAT exemption policies for certain specific services, covering areas such as finance, insurance, healthcare, education, and passenger transport.
For those businesses engaged in VAT-exempt activities, they are not required to register for and pay VAT, but correspondingly, they cannot claim VAT refunds on materials or services purchased for such activities. For businesses engaged in zero-rated activities, they must register for VAT but do not actually have to pay VAT, nor do they need to include VAT in the pricing of goods or services. Additionally, these businesses have the right to apply for refunds on the VAT included in the goods or services provided by their suppliers.
2.2.4 Value-Added Tax
In Denmark, value-added tax (VAT) is only payable when goods are sold or brought in domestically. Any company importing goods into Denmark or producing goods within Denmark must first register with the Danish tax authorities to fulfill VAT obligations. VAT is levied on specific goods, including but not limited to petroleum products, certain types of packaging materials, alcoholic beverages, tobacco, chocolate and candy, coffee, etc.
Denmark's value-added tax rate varies by product category. For alcoholic beverages, tax rates are divided into two tiers: for spirits with an alcohol content exceeding 22%, the tax rate is 100%; while for alcoholic beverages with an alcohol content below 22%, the tax rate is 50%. As for tobacco products, the tax rate also varies by type. Notably, the consumption tax on tobacco products in Denmark is levied at the production stage.
3. Denmark's Cryptocurrency Tax Policy
3.1 Denmark's Qualitative Assessment of Cryptocurrency
In Denmark, the Financial Supervisory Authority stated in December 2013 that Bitcoin (and other cryptocurrencies) is not considered currency, and in March 2014, the Danish central bank issued a similar statement. Ultimately, in early 2018, the Danish Taxation Committee ruled that profits from crypto trading are taxable, meaning that cryptocurrencies are viewed as speculative assets and treated as a high-risk investment tool in Denmark, at which point there is a lack of a clear regulatory framework, and no official regulatory body manages and regulates it, leaving investors to bear investment risks on their own.
3.2 Current Status of Denmark's Cryptocurrency Tax Policy
3.2.1 Overview of the Current Situation
The Danish government considers cryptocurrency gains as capital income and requires investors to assess their crypto asset portfolio annually. At the same time, Denmark allows investors to use investment losses to offset gains.
In addition, the Danish government plans to incorporate crypto assets into the same tax regulatory framework as traditional investment products, aiming to align the cryptocurrency tax system with existing rules for stocks, bonds, and other investment types. For example, the existing thin capitalization rule in Denmark's tax system refers to limiting companies' use of debt rather than equity financing to reduce their tax base, thus preventing tax avoidance through capital thinning. Specifically, if a company's debt-to-equity ratio is excessively high, the tax authorities may adjust its tax treatment to ensure tax fairness. Alternatively, the controlled foreign company rule applies to controlled foreign companies established by companies with control in Denmark. If these companies fail to repatriate profits back to Denmark under certain circumstances, the Danish tax authorities may treat these unreturned profits as income sourced from Denmark and tax them. The coordination rules primarily aim to strengthen the Danish government's control over the cryptocurrency industry and reduce the original complexity of taxing crypto assets.
In recent years, against the backdrop of the rapid development of the cryptocurrency market, the Danish government has placed great importance on the tax issues of this emerging field. As a result, they have been actively and deeply researching the tax system for the crypto industry. This series of efforts ultimately led to the smooth introduction of the new proposal for taxing unrealized capital gains from crypto assets.
3.2.2 Tax on Unrealized Gains
The Danish government is conducting an innovative attempt, with its tax law committee issuing a tax proposal for cryptocurrency assets. The formal legislative process is expected to begin in early 2025, at which point the Minister of Finance will present relevant bills to Parliament. The proposal suggests that a market price-based tax system for crypto assets will take effect from January 1, 2026, imposing a tax rate of up to 42% on unrealized gains from cryptocurrencies. Notably, this proposal has been made against the backdrop of a rising usage rate of cryptocurrencies in Denmark and plans to apply retroactively to crypto assets acquired since the birth of Bitcoin in 2009, while allowing investors to offset gains with investment losses.
This proposal is comprehensively elaborated in a detailed 93-page report, with its core objective being to align the tax system for crypto assets with traditional financial instruments while addressing the many long-standing challenges in the crypto industry. Danish Tax Minister Rasmus Stoklund emphasized the necessity of this reform and pointed out the unfair tax burdens faced by cryptocurrency investors under the current regulations. Minister Stoklund stated, "In recent years, cryptocurrency investors in Denmark have often suffered from heavy taxation. The committee's suggestions ensure a fairer and more reasonable taxation of gains and losses for cryptocurrency investors."
4. Denmark's Cryptocurrency Regulatory Framework
4.1 Financial Business Act
According to the Financial Business Act, Denmark has established strict entry requirements for companies involved in the cryptocurrency market, requiring companies to obtain authorization before providing crypto asset services and to notify the Danish Financial Supervisory Authority at least 40 working days before offering services for the first time. Moreover, under Chapter 9 and Section 181 of this regulation, if a company operates as a financial holding company or a mixed holding company, it must also follow specific registration procedures. When amending company articles, such financial enterprises must submit a dated copy of the articles of association to the Danish Business Authority, which should include all newly amended content. Subsequently, the Danish Business Authority will forward this copy to the Danish Financial Supervisory Authority. This series of strict registration and authorization controls aims to prevent potential risks from the source and lays a solid foundation for the future development of the cryptocurrency industry.
Furthermore, the law further emphasizes that if a company chooses to establish its headquarters or registered office in Denmark solely to evade the legal regulations of its primary customers' country/region, the Danish Financial Supervisory Authority will legally refuse its authorization application. This strict provision effectively maintains the regulatory development of Denmark's crypto industry, reducing legal risks that may arise from foreign companies and providing a more solid and comprehensive guarantee for the legitimate rights and interests of related enterprises and employees.
To respond more efficiently and swiftly to risk management needs, this regulation grants the Danish Financial Supervisory Authority (or other Danish institutions authorized by law) special powers, allowing it to enter the premises of cryptocurrency service providers (excluding asset-backed tokens and electronic money tokens) without a court order at any time and require individuals involved in cryptocurrency transactions (again, excluding asset-backed tokens and electronic money tokens), issuers of asset-backed tokens, issuers of electronic money tokens, and cryptocurrency service providers to cooperate in providing information and conducting necessary inspections. This initiative aims to more effectively regulate the cryptocurrency industry, severely combat illegal activities, and ensure that the assets of crypto investors are not compromised.
4.2 Alternative Investment Fund Managers Act
If the management team members of an alternative investment fund manager fail to take necessary measures in the event of significant losses or imminent significant loss risks, they will be subject to fines or a maximum of 4 months of imprisonment, provided no higher penalties apply under other laws. Individuals associated with alternative investment fund managers who provide false or misleading information to public institutions, the public, any legal entity, or investors of the funds managed may also face fines or up to 4 months of imprisonment if it results in significant or repeated negligence leading to investor losses.
At the same time, to prevent conflicts of interest, this regulation requires alternative investment fund managers to establish risk management functions that should be separated from the operational units (including portfolio management functions) in both function and hierarchy, and be consistently effective in identifying, measuring, managing, and monitoring all risks related to the investment strategies, objectives, and risk conditions pursued by each alternative investment fund they manage.
If members of the management team of an alternative investment fund manager fail to take necessary measures in the event of significant losses or imminent significant loss risks, they will be fined or face a maximum of 4 months imprisonment, provided that they should not receive higher penalties according to other laws. Individuals associated with alternative investment fund managers who provide false or misleading information to public institutions, the public, any legal entity, or investors of the funds managed may also face fines or up to 4 months imprisonment if it results in significant or repeated negligence leading to investor losses.
It can be seen that this regulation adopts a stricter attitude toward post-event handling. Strict punitive measures can effectively curb actions that harm the interests of cryptocurrency investors, help maintain good order in the crypto industry, strengthen the preventive role of the law, and further enhance government oversight of the crypto industry.
4.3 Anti-Money Laundering and Counter-Terrorism Financing Act
(Anti-Money Laundering and Counter-Terrorism Financing Act) stipulates that if a company or individual knows, suspects, or has reasonable grounds to suspect that a transaction, funds, or activity is related to money laundering or terrorism financing, they must immediately notify the Anti-Money Laundering Secretariat. This also applies to suspicions arising from inquiries by potential clients attempting to conduct transactions or wishing to conduct transactions or activities. Transactions and investment activities related to crypto assets are also subject to regulation under the Anti-Money Laundering and Counter-Terrorism Financing Act.
The Anti-Money Laundering Secretariat operates independently and autonomously, serving as the national central unit responsible for receiving and analyzing reports of suspicious transactions and other information related to money laundering, related upstream crimes, or terrorism financing; disseminating its analysis results and any other relevant information to competent authorities, institutions, and groups in cases of suspected money laundering, related upstream crimes, or terrorism financing; and cooperating with other institutions to prepare and update national risk assessments in the anti-money laundering field to identify, assess, understand, and limit current money laundering risks.
This practice reflects Denmark's firm determination and efficient execution in combating money laundering and terrorism financing activities. By requiring companies and individuals to promptly report suspicious circumstances, the monitoring and early warning capabilities against such criminal activities can be significantly enhanced. Furthermore, the independence and professionalism of the Anti-Money Laundering Secretariat ensure its impartiality and accuracy when handling relevant information. Additionally, close cooperation with other institutions can form a more comprehensive and effective anti-money laundering network, further enhancing the country's financial security level. Overall, this practice is of great significance for maintaining national financial order and social stability.
4.4 Other Regulatory Measures
The Danish government has officially announced that starting in 2027, it will begin to exchange data on Danish cryptocurrency investors at the international level. Additionally, they expect to introduce a new bill in early 2025 that will require cryptocurrency service providers to report customer transaction details to the authorities. This move aims to strengthen regulatory oversight of approximately 300,000 cryptocurrency investors in Denmark and effectively curb potential tax evasion.
This decision demonstrates that the Danish government is taking proactive and forward-looking measures to maintain the order of cryptocurrency taxation and ensure financial security. The Danish government hopes that through international data exchange, it can more comprehensively grasp the trading dynamics of cryptocurrency investors, providing more precise information support for tax regulation. At the same time, its requirement for service providers to report transaction details further strengthens the oversight of cryptocurrency transactions, helping to promptly identify and address potential tax evasion issues, which is significant for maintaining fairness in Denmark's crypto taxation and financial stability.
5. Summary and Outlook
In terms of the tax system, Denmark has innovatively proposed a tax on unrealized gains from crypto assets in its current tax system, explicitly stating that crypto investors can use investment losses to offset gains. This measure aims to potentially alleviate the issue of tax unfairness faced by current cryptocurrency investors but may lead to cash flow strain for investors and distort their long-term investment decisions. Therefore, the Danish government needs to carefully weigh various factors when implementing this proposal to ensure it effectively addresses tax unfairness while avoiding unnecessary negative impacts on investors and the market, with the actual effectiveness being highly anticipated by all sectors of society.
On the regulatory front, Denmark has adopted a series of fine and comprehensive measures aimed at creating a healthy and orderly development environment for the cryptocurrency industry. Firstly, through strict regulations on company registration and authorization processes, Denmark strives to ensure that all businesses engaged in crypto activities meet legal requirements, thereby controlling industry quality from the source. On this basis, the Danish government has also decentralized regulatory powers, allowing relevant departments to flexibly conduct inspections at any time to ensure compliance during the operation of companies. For violations of regulatory provisions, Denmark has implemented a tiered penalty mechanism. Minor violators may face service suspensions or fines as a warning; while serious violators may face license revocation and even imprisonment as strict sanctions, which effectively deters potential illegal activities. Through this series of initiatives, Denmark has not only effectively limited various risks that may occur within the cryptocurrency industry but also maintained the stability and security of the national financial system.
We firmly believe that Denmark will continue to strengthen and improve the tax and legal framework for crypto assets in the future, which is a key step in driving the maturity of Denmark's crypto industry. At the same time, Denmark will continuously refine its regulatory framework, enhancing the effectiveness of its oversight of the crypto sector to safeguard the stability of the financial market and market order. Denmark is steadily moving towards building an environment conducive to the healthy growth of cryptocurrencies, and through this series of arrangements, Denmark is expected to play a more active role on the global cryptocurrency stage, contributing to the normalization and prosperity of the industry.