Denmark

Last modification: 18 Apr 18
Introduction: 

Denmark is Nordic country and a sovereign state and also comprises two auonomous constituent countries in the North Atlantic Ocean: the Faroe Islands and Greenland. 

 

Chapter 1: Economic and business environment

Demographics

5.6 million inhabitatants

Capital

Copenhagen

Major cities

Aarhus, Odense, Aalborg

Languages

Danish

GDP

- GDP (PPP): $264.837 billion, world ranking 52nd
- GDP (per capita): $46,602, world ranking 19th

*2016 estimate

Unemployment rate

4.3% (April 2017)

Main industries

Maritime shipping, fishery, agriculture, renewable energy, pharmaceuticals, petroleum and gas, furniture

Currency

Danish krone (DKK)

Interest rate

0.55% (April 1017)

Political key info
  • Governance: parliamentary monarchy
  • EU member since 1973
  • 12th-largest economy in the European Union
  • 6th most attractive country in the world to invest
Inflation

1.0% (April 2017)

Chapter 2 : Automotive market, segments & sales

Total Car park

2,466,000 registered cars (end of 2016)

New vehicle registrations (Cars, LCV, Trucks)
  • In 2016, Danes bought a total of 222,924 new cars – the 7th annual increase, and an absolute record.
  • The continuing increase was ascribed to low interest rates, a rise in wages, an increase in employment, and high consumer confidence. These factors are likely to continue throughout 2017.
Top 5 brands (total market)

2016

  • Volkswagen (26.395 units, 11.8%)
  • Peugeot (22.175 units, 9.9%)
  • Toyota (16.669 units, 7.5%)
  • Renault (14.556 units, 6.5%)
  • Ford (14.173 units, 6.4%)
Model preference top 5 (total market)

2016:

  1. Peugeot 208 (8,794)
  2. VW Up (6,767)
  3. Peugeot 308 (5,752)
  4. VW Polo (5,432)
  5. Toyota Yaris (5,033)
Used car market/renewal cycle

The used-car trade in Denmark is significant compared to its new-car trade, and also on the increase 
2015: 532,949 units
2016: 542,696 units

Chapter 3: Company car market

Evolution fleet sales (last 5 years)
2012 69,723 units
2013 66,491 units
2014 84,340 units
2015 102,872 units
2016 120,025 units

*Source: http://www.statistikbanken.dk/BIL5

Chapter 4: Taxation & legislation

Taxation & legislation
- Any vehicle owner resident in Denmark needs to register their car in order to circulate freely on Danish roads.
- If the vehicle owner resides abroad but the user resides in Denmark, the vehicle will need to be registered to both the owner and the user.
- Exemption from the requirement of Danish residents to register their foreign car can be granted by Danish tax authorities in the following cases: 
   - if said vehicle is used mostly outside Denmark (>50%/days or >50%/mileage over the previous 12 months)
   - if said vehicle is used only for commuting between the home and (beyond) the border.
   - if the persons driving said vehicle will be resident in Denmark for less than 6 months.
- Non-Danish residents can use a car with foreign license plates on Danish public roads without registering it, provided the driver does not stay in Denmark for longer than 185 days per year.

4.1. Car Taxation


Cars registered and used in Denmark are subject to a number of taxes:

  • registration tax (at acquisition)
  • circulation tax (annual)
  • petrol and diesel tax (on fuel at purchase)
  • bridge toll (not formally a tax)

4.1.1. Registration Tax

Payable at the time of first registration, in principle by the person in whose name the car is registered. In practice often paid by the dealer on behalf of the owner. Leasing companies are entitled to pay themselves for the cars in their fleets.
In case of a new car, this tax is based on the sales price, but to some extent also on the car's technical equipment (e.g. there is a tax reduction for air bags and other equipment)..
- For new petrol and diesel cars with a sales price up to DKK 106,600, the tax rate is 105%. For cars with a higher sales price, the rate is 150%.
- For new LCVs and trucks, the rate is 0% for the vehicle's value up to DKK 34,100 and 30% for the rest of the car’s value.
in case of a used car, this tax is an estimate, based on the sales price for a similar car purchased in Denmark, with VAT but without registration tax.
It is possible to bring a vehicle into Denmark for a limited period of time and only pay a quarterly registration tax for that period, plus interest – but only if the Danish tax authorities grant such an exemption.
It is also possible for lease companies to only pay registration tax for the period in which the vehicle is leased.

4.1.2. Circulation tax

A circulation tax is due for every year the vehicle is registered in Denmark, in principle payable by the person to whom the vehicle is registered.

  • For petrol cars, the tax due is based on fuel economy and is divided in 24 increments. Some samples of the rates in 2017:

- petrol vehicles with a fuel economy upwards of 20 km/l pay DKK 310 per 6-month period. This is the lowest rate.

- petrol vehicles with a fuel economy below 4.5 km/l pay DKK 10,830 per 6-month period. This is the highest rate.

- A middle rate, for example for petrol vehicles with a fuel economy between 9.1 and 10.0 km/l, is DKK 3,800.

  • For diesel cars, the tax due is also based on fuel economy, and is divided in 27 increments. On top of that, there is a special diesel tax, also based on the same categories. Some samples of the rates for 2017:

- diesel vehicles with a fuel economy upwards of 32.1 km/l pay no circulation tax, but they do pay an additional tax of DKK 130 per 6-month period. This is the lowest rate.

- diesel vehicles with a fuel economy below 5.1 km/l pay DKK 10,830 per 6-month period. They also pay an additional tax of DKK 5,270. This is the highest rate.

- A middle rate, for example for diesel vehicles with a fuel economy between 11.9 and 12.5 km/l, is DKK 2,930, plus an additional tax of DKK 2,160.

  • For LCVs and lorries, the circulation tax is applied via four criteria: weight, registration date, type of use and type of fuel.
    There are six weight categories (each next one excluding the previous): up to 500, 1000, 2000, 2500, 3000 and 4000 kg. There are two registration date categories: between 3 June 1998 and 25 April 2007, and after. There are two types of use: partly commercial (yellow license plates) and private (regular plates). And there are two different rates for diesel and petrol.
     

If the van is used for both professional and private purposes, the tax will be lower.

  • Cars older than 35 years which are either in private collections or used for entertainment or cultural purposes, can be imported and registered with only 40% of the value as new used for calculating the tax.
4.2. Income tax – Taxable persons


For the purpose of direct taxes, all costs relating to cars are fully deductible for both the employer and for the self-employed. There is no deduction for costs related to private use of the car.
The split between business and private use is normally based on an estimate, but it is also possible to make a deduction based on actual business mileage, multiplied by the maximum mileage allowance rates.

  • The sole, standard VAT rate for goods and services is 25% in Denmark.
  • Taxable persons are entitled to recover VAT paid in connection with VAT-taxable activities. But special conditions apply to vehicles: input VAT may be recoverable only partly or not at all, even if the vehicle is used for VAT-taxable purposes only.

4.2.1. Deduction

  • For passenger cars
    - input VAT on purchase, short-term (less than 6 months) rent/lease, and use of cars carrying up to nine persons cannot be deducted.
    - VAT on the bridge toll for the Oresund Bridge can be deducted if the driving relates to VAT-taxable activities, but VAT is not deductible on the bridge toll for the Storebælt Bridge.
  • For commercial and cargo vehicles
    - with a total weight up to 3 tons, input VAT on purchase can be deducted only if the vehicle is exclusively used for VAT-taxable activities. Input VAT related to the use of such vehicles can be deducted in full, even if the vehicle is only partly used for VAT-taxable activities.
    - with a total weight more than 3 tons: input VAT on purchase and operation can be deducted in accordance with the general rules (normally based on a fair estimate of the actual use of the car).
  • For car phones, VAT can be deducted on acquisition and use costs, to the extent that the phone is used for VAT-taxable purposes.
  • For companies whose main activity is the sale or lease of passenger cars, input VAT on the purchase and use of passenger cars can be deducted according to special regulations. The same applies for VAT on cars for driving schools.

4.2.2. Deduction of input VAT related to car rental

  • VAT related to leasing or rental of cars is generally not deductible, except when:

- the leasing/rental period exceeds six months, and

- at least 10% of the annual use of the car is for VAT-taxable purposes.

  • The lessor must indicate the monthly deductible amount on the invoice. The deductible proportion will in most cases be 50% to 70% of the total VAT amount on the monthly leasing payment.
  • For leased commercial/cargo vehicles with weight less than 3t that are also used for non- VAT-taxable purposes (such as for private use), one-third of the VAT on the lease can be deducted. If such vehicle is exclusively used for VAT-taxable purposes, 100% of the VAT on the lease is deductible.
  • For leased commercial/cargo vehicles with weight over 3t, VAT on the lease is deductible in proportion with the VAT-taxable activities.

4.2.3. Leasing and VAT

A lease agreement will be defined as either operational or financial lease, with the first one being the most popular.
Operational lease agreements are treated as a taxable service for VAT purposes. The lessee can deduct the input VAT as described in the above segment.
Financial lease agreements are treated as a supply of goods for VAT purposes.

4.3. Company car


Private use of a company car in principle leads to taxation of the employee, adjustment of input VAT deducted upon the acquisition of the car by the company, and an additional tax for private use.

4.3.1. VAT due on private use of company cars

  • As businesses have no right to deduct input VAT incurred for purchases of passenger cars or for related costs, private use of the company car has no VAT consequences.
  • VAT consequences of the private use of commercial and cargo vehicles (with the yellow number plates) depend on the weight of the vehicle in question, the period since the purchase, but mainly whether the car is intended for both private and business use, as described earlier.
  • If the use of the car is changed within five years after the year of purchase, a regulation mechanism may apply.
  • In general, all driving between the employee’s home and place of work is regarded as private use, except in the case of driving between changing places of work and driving connected to duty schemes, etc.

4.3.2. Tax due on private use of company cars (LCVs and trucks) – only private use

    <500 kg <1000 kg <2000 kg <2500 kg <3000 kg <4000kg
PETROL After 25/4/7 6,920 7,200 8,050 9,600 10,330 22,000
DIESEL After 25/7/7 7,500 8,030 9,180 11,020 11,940 23,820

If the van is used for both business and private purposes, the tax will be lower.

4.3.3. Company car – income taxes

Company cars provided to employees for both business and private purposes constitute a taxable benefit in Denmark.

  • The taxable value is independent of the actual operating costs for the employer, and of the powertrain of the vehicle.
  • It is calculated as the sum of 25% of the value of the car up to DKK 300,000 and 20% thereafter.
  • The calculation base cannot be less than DKK 160,000 – i.e. one and a half times the annual circulation tax.
  • If the employee from their net salary pays the employer partly or in full for the company car, this amount will be deducted from the taxable value of the company car.

- This value depends on whether the vehicle is more than 36 months old or not at the time the employer rents or leases it.

- if less old, the calculation is based on the new car price, which equals the list price or first registration value, plus car tax, VAT, costs of delivery and ordinary accessories. This price is the basis of calculation in the 36 months after the first registration. After this period, the calculation basis is 75% of the new car price.

- If older, the calculation is based on the actual acquisition price paid by the employer, including any costs of delivery, repairs and ordinary accessories.

4.3.4. Company car – no VAT and income taxes to be paid

For DKK 225, one can buy a day ticket (dagsbevis) for the use of a company vehicle under three tons, registered for commercial use only, in which case no income taxes (by the employee) nor repayment of deducted VAT (by the employer) are due.

  • The ticket is valid for one calendar day
  • There is a maximum of 20 tickets per car and employee per calendar year.
4.4. Income taxes – drivers’ personal taxation


Employees without a company car are not allowed to deduct private-use car costs in their personal tax declaration.

  • But they can get a mileage deduction (kørselsfradrag) for daily commutes exceeding 24km per day by car, bus, train, etc.
    • The deduction amounts to DKK 1.93/km up to 120 km, and DKK 0.97 beyond that – with special tariffs for persons on low income or in fringe areas.
  • Employees using their private car for business purposes may receive a tax-free mileage allowance (kørselsgodtgørelse) from their employer.
    • The allowance is DKK 3.53/km for the first 20,000 km per calendar year and DKK 1.93/km thereafter. It is understood to cover all operating and depreciation costs, except bridge and road tolls and parking fees.
  • Mileage allowance may not substitute salary, which means a number of conditions apply. If not met, the allowance is considered a cash payment which should be reported as income and from which tax should be withheld.
4.5. Electric vehicles
  • A 20% registration tax for electric vehicles was introduced from 1 January 2016 and will be rolled out over a five-year period. It has gone up to 40% in 2017 and rise to 65% in 2018, 90% in 2019 and 100% in 2020.
  • Also, an adjustment of the calculation of the fuel consumption for plug-in hybrid vehicles is made, which will lead to a higher registration tax for these vehicles over a five-year period, from the start of 2016.
  • The calculation of the annual circulation tax for electric vehicles is based on the electric consumption in kWh converted into km petrol per litre.
4.6. Future developments


In accordance with the Kyoto Protocols, Denmark is adjusting its taxation to incentivise the purchase of eco-friendly vehicles

4.7. Legal background (import taxes)

Chapter 5: Car policies

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Chapter 6: Funding methods

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Chapter 7: Fuel

Fuel prices are usually much higher than the rest of Europe.

Fuel type segmentation

New passenger cars per fuel type 2015 2016
Petrol 65,2% 59,9%
Diesel 31% 36%
PHEV 1,2% 3%
EV 2,6% 0,9%
Other na 0,1%

*Source: http://www.acea.be/statistics/article/trends-in-fuel-type-of-new-cars-between-2015-and-2016-by-country

Fuel Price Evolution
Denmark has a high and relatively equal income range. Petrol prices are high as well, increasing the pressure to look for alternatives, such as biking.

Year Average price of a litre of petrol (Q1)
2017 1,49 euro
2016 1,40 euro
2015 1,57 euro
2014 1,67 euro

Fuel infrastructure
There are 9 major gas station chains in Denmark and a few independant dealers. The major chains are:
 

Shell    
Statoil 300 gas stations  
Q8 250 gas stations  
F24 71 gas stations part of Q8 family
OK 700 gas stations Owned by customers
OK Gas Card
Ingo 71 gas stations part of Statoil
UnoX 300 Gas stations  
YX 73 gas stations part of UnoX
Go On    


Hydrogen fuel network
In 2011, Nel began the construction of a network of H2Stations for the entire country. Today, 9 are in operation. The Danish H2Station® network is established and operated in collaboration with leading energy, gas & oil companies. 
*Source: http://nelhydrogen.com/h2station-for-the-worlds-first-countrywide-network-in-denmark/




 

Chapter 8 : TCO components

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Chapter 9: Safety, insurance and telematics

Safety

  • Total number of road deaths (2013): 196
  • Road deaths per 100,000 inhabitants (2013): 3.5 (9th best in the world)

 

Chapter 10: Environment

  • In 2014, Denmark was the 74th largest overall producer of CO2 emissions in the world, at 9.1 million metric tons of carbon.
  • Of all CO2 emissions, 32.9% were from transport – up from 16.5% in 1996.
  • In 2014, Denmark emitted 1.93 tons of CO2 per capita from transport, down on average 1.1% since 2000.

Chapter 11: Mobility

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Chapter 12: Key trends to watch