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Danish government to exempt King and Queen from inheritance tax

Denmark's government plans next month to present a bill to parliament that will exempt King Frederik and Queen Mary from paying inheritance tax on castles and other property they stand to take over from Queen Margrethe II.

Published: 8 March 2024 15:08 CET

Danish government to exempt King and Queen from inheritance tax

The Marselisborg Castle is the personal property of Queen Margrethe, who received it as a present from her father. Photo: Bo Amstrup/Ritzau Scanpix

According to the Ministry of Taxation, the change concerns assets that a ruler of Denmark and his spouse inherit or take over from their predecessor.

“The background is that when there is a change of throne, a number of historical objects and assets with great importance for the common cultural heritage pass to the new royal couple,” the ministry said in a written statement to the Ritzau newswire.

“It could be buildings or vehicles which in many cases are considered an essential prerequisite for carrying out the task as ruler, and of serving as the Royal Couple, and which are crucial for the continuation of the Royal House and the shared cultural heritage.

The Danish royal family’s main residences, such as the Amalienborg Palace, Fredensborg Castle and Graasten Castle, are all aleady the property of the Danish state, so the planned tax exemption would not be relevant to them.

But Queen Margrethe II also owns several properties herself, including the Marselisborg Castle, which she received as a wedding present from her father, and also the Chateau de Cayx castle near Cahors in southern France, along with its extensive vineyards.

The Danish royal family also owns a large fleet of vehicles, which includes, among other things, the so-called crown cars with special number plates.

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How does income tax work in Denmark?

All wage earners in Denmark pay an income tax (indkomstskat), which consists of various components. The largest part of most people’s income tax is municipality tax (kommuneskat), which I about 25 percent of your gross income (the actual percentage varies by 1-2 percent depending on the municipality in which you live).

A salary in Denmark also include deductions for labour market tax (AM-bidrag 8%), state tax (bundskat 12%) and state pension contribution (ATP-bidrag 94.65 kroner).

If you have an income of 45,500 kroner per month (which is the average salary in Denmark, according to Statistics Denmark), that means around 45 percent will be taxed, and 94.65 will go towards the state pension.

Various tax deductions can result in this amount being reduced, the most common one being for commuting to work.

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Depending on your earning levels, you may also be taxed at higher rate for the highest bracket of your salary. This high-wage tax bracket is called topskat (literally “top tax”).

The amount you need to earn to pay topskat changes each year but in 2024, the threshold is 640,108 kroner. After labour market contributions (AM-bidrag), this is 588,900 kroner.

If you earn less than this, you don’t pay topskat. If you earn more than this, you pay a tax rate of 15 percent on all earnings from this threshold and up.

To give an example, if you earn 690,108 kroner before labour market contributions, you will pay 15 percent topskat on 50,000 kroner of your earnings – the amount by which the threshold is exceeded.

A major tax reform to be phased in from next year will see several changes to the income tax system, particularly in relation to top tax and other tax brackets.

Topskat will be halved for persons whose annual income is under 750,000 kroner, meaning they will pay a rate of 7.5 percent on income that falls into the topskat bracket, instead of the regular 15 percent. This “lower” rate of topskat has been termed mellemskat (“medium-tax”).

A new rate will meanwhile be introduced for the very highest earners, often referred to in Danish as toptopskat, literally “top-top-tax”. The new bracket will apply to people with annual incomes over 2.5 million kroner.

As well as income from employment, other types of personal income are included in the tax calculation. These can include pension distributions, social security benefits, property earnings, remuneration for advisory assistance and dividends from Danish companies.

A complex list and system of deductions (fradrag) is used by the Danish tax model, such as the commuter deduction mentioned above as well as pension contributions, trade union and unemployment insurance memberships, home services and work costs. Deductions can be applicable to the various types of income or tax base.

Do you have any specific questions about the Danish tax system you’d like us to write about? Let us know.

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