It is useful to know the current Danish taxation and VAT regulations, whether you are a company car user or responsible for your company's car fleet. We present an overview of these regulations here.
- The taxable value of a company vehicle is calculated at 25% of the car’s taxation basis up to DKK 300,000, and 20% of the remaining value
- The minimum taxation basis is DKK 160,000
- An environmental supplement must be added to the taxable value (see under Environmental supplement)
- In 2020, a special tax deduction of up to DKK 40,000 is applied to electric vehicles and plug-in hybrids
Calculation of the taxation basis
The taxation of a company vehicle is defined by the vehicle's purchase price for the first three months. During and after the fourth month, the taxation basis will follow the market price, i.e. the technical price of a new car. This is a mandatory recalculation, which was made effective on October 3, 2017.
The recalculation is carried out by documenting the vehicle's market value when the car is four months old at the latest. In order to calculate the technical price of a new car, the market value will be discounted back to the vehicle's first date of registration.
Be aware that the rules regarding the calculation of the taxation basis have been modified on February 1, 2020. Therefore, the modification applies to everyone who changes vehicle on and from this date, regardless of the order date and regardless of whether it is a new car or a second-hand company car taken over from a colleague. However, second-hand company cars will not be affected by the modification provided that the vehicle's date of registration is before October 3, 2017.
Taxable value on renewal of contract
On re-leasing or renewal of a leasing contract, where the vehicle was at least 36 months old at the time of the establishment or renewal of the contract, the practice so far has been to calculate the taxable value at 75% of the price of a new vehicle. Based on a decision from the Danish Tax Assessment Board, this practice has now been changed, so that the vehicle's current market value is used as the taxable value of leased vehicles over 36 months old that are re-leased or for which the leasing contract is renewed.
If the contract terms are unchanged during the leasing period, the taxable value is reduced to 75% of the original taxable value when the vehicle is +36 months old.
Second-hand company cars
A second-hand vehicle that is more than 3 years old (i.e. over 36 months) is valued for tax purposes at the market price including delivery costs, together with the costs of refurbishing and preparation.
If the employee is to pay part of the leasing charge, the taxable value of the company car is reduced by the amount paid. This reduction may be made from the employee's gross and/or net salary. A net salary reduction entails an equivalent reduction of the monthly taxable value.
Taxation of environmentally friendly vehicles
In 2020, a special tax deduction of up to DKK 40,000 is applicable to electric vehicles and plug-in hybrids equivalent to a monthy deduction of DKK 3,333 in gross taxation. There is no requirement for the acquisition date. Therefore, electric vehicles and plug-in hybrids that are already registered will also benefit from this deduction.
According to the passed legislation, the deduction applies from April 1, 2020 to December 31, 2020. Hence, as of this moment, there is no guarantee the deduction will continue in 2021.
An environmental supplement must be added to the taxable value of a free car.
(Note that as of January 1, 2013, the environmental supplement was increased by 50%.)
For passenger vehicles and vans subject to the green ownership tax rules:
- Cars registered for the first time on March 18, 2009 or later will be liable for green ownership tax.
- The environmental supplement for cars running on petrol corresponds to the annual green ownership tax for the vehicle.
- The environmental supplement for diesel cars corresponds to the annual green ownership tax, but with deduction of the green equalisation tax.
For vans subject to the vehicle excise duty rules:
- For vans registered for the first time before March 18, 2009, the vehicle excise duty rules at that time will apply, and the environmental supplement for vans will correspond to the vehicle excise duty – but without any supplement for private use.