Taxation of Global Income
The general rule is that you are subject to global income taxation in the country where you reside. If one resides in Denmark, they are liable to pay taxes in Denmark on their entire income, regardless of its source or the country it originates from. This is a fundamental principle in Danish tax law and is enshrined in what is perhaps the most basic provision for the collection of income tax – section 4 of the State Tax Act of 1923 (Statsskatteloven § 4).
An individual is fully liable to pay taxes in Denmark if they have a residence in Denmark. Residence is something that a Danish citizen residing in Denmark is inherently deemed to possess, and this status only ceases when an individual effectively leaves the country and abandons their residence and employment here.
If one arrives from abroad, one wll become fully liable to pay taxes in Denmark as soon as one spends more than 180 days within a 12-month period or 3 consecutive months in Denmark and have housing at disposal. If one engages in employment while having housing at ones disposal, one becomes fully liable to pay taxes in Denmark immediately. If housing is not available, one becomes fully liable to pay taxes here after 183 days of stay regardless of other factors.
It may sound simple, but it is not. The definitions of “stay,” “engaging in employment,” and “housing at disposal” are repeatedly subject to tax-related issues and disputes between citizens and authorities. Therefore, it is often – but not always – easy to determine whether one is subject to global income taxation in Denmark or not. However, one can generally assume that they are if they were born in Denmark and have lived here ever since.
Most other countries have a similar global income taxation principle. This can be beneficial if one lives and works in the same country throughout their life and does not have income from abroad.
In a modern world with an increasing number of cross-border jobs, daily routines, and lives, many individuals end up earning income from various countries. Some also experience living in different countries – and sometimes, from a tax perspective, simultaneously residing in multiple countries.
At PrivatRevision, we can assist in clarifying tax liability relationships and navigating the options available when one becomes liable to pay taxes in one or in multiple countries.