Denmark: New Taxation Rules for Company Cars Effective July 1st, 2021

May 20, 2021
1 min read
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Earlier this year, the Danish government passed a new bill on company car taxation.

The changes imposed are as follows:

Car taxation rates:

  • Currently, the taxation base for a new company car is calculated as 25% of the car’s value up to 300,000 DKK and 20% of the value over 300,000 DKK. An environmental supplement is added to this amount. Over the next 5 years, this calculation method will be phased out, and the change at 300,000 DKK will no longer exist.
  • From July 1st, 202, the 25% taxation rate will be reduced yearly by 0.5%, and the 20% taxation rate will increase yearly by 0.5%. These adjustments will be made until the 2 rates meet at 22.5% in 2025.

This rate applies to all company cars. As a result, drivers of company cars with a value up to 600,000 DKK will pay less in taxes, while drivers of company cars with a value of more than 600,000 DKK will pay more in taxes.

Environmental supplement (Miljøtillæg) percentage changes:

A company’s car environmental tax is currently calculated on a fixed percentage of 150% of the “ownership tax.” For example, if the annual ownership tax amount for a specific car was DKK 2.500, the environmental supplement is DKK 3.750.

From July 1st, 2021, this percent will increase annually until 2025.

The schedule is as follows:

  • 2021 – 250%
  • 2022 – 350%
  • 2023 -450%
  • 2024 – 600%
  • 2025 and on it will be a fixed percentage of 700% of the ownership tax.

To ensure the correct car taxation value is applied as of July 1st, 2021, all companies that provide company cars to their employees should contact their leasing provider and request an updated leasing agreement.

 

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