Capital Gains Taxation in Denmark
In Denmark, capital gains are subject to taxation under the Income Tax Act (ITA). The ITA defines capital gains as profits derived from the disposal of assets, including:
- Real estate
- Stocks and bonds
- Business assets
The distinction between short-term and long-term capital gains is not relevant for tax purposes in Denmark.
Calculating Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The acquisition cost includes the purchase price, any expenses incurred in acquiring the asset, and any improvements made to the asset during ownership.
Tax Rates
Capital gains are taxed at a flat rate of 27% in Denmark. However, certain exemptions and deductions may apply, such as:
- The primary residence exemption: Gains from the sale of a primary residence are exempt from capital gains tax.
- The business asset exemption: Gains from the sale of business assets used in the taxpayer's trade or profession are exempt from capital gains tax.
Legal Framework
The taxation of capital gains in Denmark is governed by the following articles of the ITA:
- Section 4: Chargeable income
- Section 16: Capital gains
- Section 17: Exemptions and deductions
Policy Objectives
The Danish capital gains tax system aims to:
- Ensure that individuals and businesses contribute their fair share of tax on profits realized from investments and asset disposals.
- Promote investment and economic growth by providing exemptions and deductions for certain types of capital gains.
- Maintain a neutral tax treatment across different sources of income.
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