Get an overview of the applicable tax rules for company cars here.
The calculation of a car’s registration tax is based on the CO2 emission of the car, which in this case affects the technical market value for the car and thereby also the taxation base.
Based on their CO2 emission, cars are divided into three categories:
- Zero-emission cars: 0 g. CO2 emission per km, i.e., electric cars and hydrogen cars.
- Low-emission cars: Below 50 g. CO2 emission per km, i.e., many plug-in hybrid cars.
- Other vehicles: Above 50 g. CO2 emission per km, i.e., some plug-in hybrid cars as well as all hybrid cards, petrol cars, and diesel cars.
These registration rules will apply to cars that are registered on December 18th, 2020, or thereafter. This means that the taxation base for new cars that have been delivered between December 18th, 2020, and June 1st, 2021, which is when DMR has been updated, will be adjusted retrospectively based on the new calculation of the taxes.
Calculation of the registration tax for passenger cars:
- 25 % of the technical market value of the car up to DKK 65,800.
- 85 % of the technical market value of the car from DKK 65,800 to DKK 204,600.
- 150 % of the technical market value of the car above DKK 204,600.
From June 1st, 2021, the registration tax for other vehicles will be calculated based on the above method.
From June 1st, 2021, zero-emission cars are tax exempted if the technical market value of the car is below DKK 488,000. For zero-emission cars above DKK 488,000, the registration tax will be calculated based on the method for passenger cars, but only 40 % of the calculated registration tax will need to be paid. This only applies if the zero-emission car is registered before 2026. Thereafter, the registration tax will be phased out, until it is fully phased out in 2035.
The registration tax of low-emission cars is 50 % of the calculated registration tax (based on the rules for passenger cars) if the car is registered in 2022. This percentage will be increased until and including 2025:
- Registration in 2022: 50 %.
- Registration in 2023: 55 %.
- Registration in 2024: 60 %.
- Registration in 2025: 65 %.
- Registration after 2025: The registration tax will be increased with 3 percent points each year until and including 2030, whereafter it will be increased with 4 percent points each year until 2035, and from that year, it will be at 100 %, i.e., it will be calculated in the same way as other vehicles.
For vans, the registration tax of the first DKK 75,900 is 0 % and for values over DKK 75,900 (incl. VAT), it is 50 %.
For vans with a total weight at over 3 tons, the maximum registration tax is DKK 47,000. This means that vans at over 3 tons often have a lower registration tax than lighter vans above DKK 110,000 plus VAT.
If registered in 2022, the basic deduction in the registration tax is as follows:
- Zero-emission cars: DKK 167,500.
- Low-emission cars: DKK 48,750 (after CO2 fee).
- Other vehicles: DKK 21,900 (after CO2 fee).
- All vans: DKK 30,300.
- For green vans, there is an extra basic deduction at DKK 78,750 for zero-emission vans and DKK 48,750 for low-emission vans.
Temporary battery deduction for zero- and low-emission cars
From January 1st, 2022 the battery deduction is up to DKK 1,300 per kWh. This is a temporary battery deduction, which will slowly be phased out until 2025:
- 2022: Up to DKK 1,300 per kWh (however, only up to 45 kWh).
- 2023: Up to DKK 900 per kWh (however, only up to 45 kWh).
- 2024: Up to DKK 500 per kWh (however, only up to 45 kWh).
- 2025 and onwards: Battery deduction is waived.
The above applies to all electric cars and plug-in hybrid cars under 50 g. CO2 emission per km. Thus, there is no battery deduction for hybrid cars that cannot be charged or plug-in hybrids over 50 g. CO2 emission per km, which means that the registration tax is calculated in the same way as for ordinary petrol and diesel cars.
Taxable value – overview:
- An environmental fee and a CO2 fee are added to the taxable value (cf. under Environmental fee and CO2 fee below).
Calculation of the taxation base
The taxation base for a company car is defined by the car’s purchasing price the first two months. From and including month three, the taxation base will align with the market price and therefore become a technical new car price that follows the mandatory recalculation that has taken place since October 3rd, 2017. The recalculation is done by documenting the vehicle’s technical market value at the latest when the car is three months old. To calculate the technical market value, this market value is discounted back to the car’s first registration date. In this way, the technical new car price (called the technical market value) is deduced.
The taxation base for leased company cars delivered on February 1st, 2020, or later must be changed when a recalculation of the car’s registration tax occurs.
Until June 20th, 2021, the taxation base was calculated as 25 % of the technical market value of the car up to DKK 300,000 and 20 % of the value above DKK 300,000. However, this calculation method will be gradually phased out from July 1st, 2021, and the breaking point at DKK 300,000 will no longer exist from and including 2025. This means that the taxation base for all company cars in all organizations will be changed each year until 2025.
The calculation method will be phased out as such:
- July 1st–December 31st, 2021: 24.5 % of the car’s taxation base up to DKK 300,000 and 20.5 % of the remaining value.
- 2022: 24 % of the car’s taxation base up to DKK 300,000 and 21 % of the remaining value.
- 2023: 23.5 % of the car’s taxation base up to DKK 300,000 and 21.5 % of the remaining value.
- 2024: 23 % of the car’s taxation base up to DKK 300,000 and 22 % of the remaining value.
- 2025 and onwards: 22.5 % of the entire taxation base.
Taxation base for contract extensions
When releasing or extending a leasing contract, the taxation base is equal to the taxation base from the beginning of the leasing period. The monthly taxation will continue to be calculated based on the original taxation base. For cars that are 36 months or older, the monthly taxation will be reduced by 25% from the original monthly taxation.
Used company cars
A used car that is more than 3 years old (over 36 months) will in terms of taxation be valued based on the purchasing price including delivery costs and expenses related to fixing and preparation.
In the case of self-payment, which is when the employee pays part of the leasing expenses, the taxable value of the car is reduced with the paid amount. The reduction can happen either in the employee’s gross and/or net salary. A reduction in the net salary causes an equal reduction in the monthly taxable value.
Taxation of electric vehicle charging stations
From July 1st, 2021, a company car driver will not be taxed for having an employer-funded charging station installed at the home address. For existing company cars and charging stations from before July 1st, the charging station can be transferred to the company car driver tax-free and without any fees when the company car driver has been subject to taxation of a company car for at least six months.
However, only the company car can be charged on the employer-funded charging station at the home address. If a private electric or plug-in hybrid car is charged at the company’s charging station free of charge, it is considered a benefit in kind.
A CO2 fee must be added to the taxable value of all passenger cars and vans.
The level of the CO2 fee for passenger cars in 2021:
- Up to 125 g. CO2 per km: DKK 253 per g. CO2 per km
- 125-160 g. CO2 per km: DKK 506 per g. CO2 per km
- Above 160 g. CO2 per km: DKK 961 per g. CO2 per km
For vans, the CO2 fee is DKK 253 per g. CO2 per km, regardless of the amount of grams of CO2 emitted by the van.
An environmental fee must also be added to the taxable value. From January 1st, 2022, the environmental fee is 350 % of the yearly ownership tax and will gradually increase to 700 % in 2025, which applies to all cars regardless of registration date.
Read more about ownership tax here.
Source: The Danish Ministry of Taxation (Skatteministeriet)