The Danish government proposes a 42% encryption income tax, dating back to the birth of BTC in 2009

This article will introduce the taxation and regulatory system of encryption in Denmark, in order to help readers better understand the current encryption asset policy and its transformation background in Denmark. (Background: Inventory of global private sale encryption funds: data overview, regulatory environment, how to handle taxation?) In recent years, with the rapid development of the encryption asset market and the deepening of international understanding of encryption assets, the attitudes of governments and Financial Institutions towards encryption assets in various countries have also gradually evolved. Initially, Danish banks took a negative stance on encryption assets, discouraging clients from investing in Cryptocurrency to avoid promoting Money Laundering and other financial illegal activities. However, over time, Denmark has gradually shown acceptance towards encryption assets. The Danish Tax Council recently proposed to include unrealized Cryptocurrency gains and losses in the tax scope from 2026, aiming to harmonize the Cryptocurrency tax system with the current regulations of other investment products such as stocks and bonds. This article will introduce the taxation and regulatory system of encryption in Denmark, in order to help readers better understand the current encryption asset policy and its transformation background in Denmark. Overview of the basic taxation system in Denmark Tax system in Denmark Denmark is a typical developed country with high tax and high welfare. According to statistics from the Organization for Economic Cooperation and Development (OECD), among its member countries, Denmark's tax revenue as a percentage of its Gross Domestic Product (GDP) ranks first at approximately 46.3%. In the tax system of Denmark, the parliament plays a legislative role, and all tax laws can only take effect and be published after being signed by the queen and at least one cabinet minister. Tax management is the responsibility of the Danish Tax Ministry, which oversees multiple functional agencies, the National Tax Tribunal, and the National Tax Management Center (SKAT). It is worth noting that Denmark's autonomous territories, the Faroe Islands and Greenland, have independent tax systems and are not governed by the tax system of mainland Denmark. The tax systems of Denmark and the tax system of Italy introduced previously are similar, both mainly divided into two categories: direct tax and indirect tax. In Denmark, direct tax refers to the tax deducted directly from the taxpayer's income, covering corporate income tax, personal income tax, labor market surtax, church tax, property assessment tax, and property tax. Indirect tax is the tax paid by taxpayers when purchasing goods or services, mainly including value-added tax, customs duties, carbon emission tax, and consumption tax. Main types of taxes in Denmark Personal income tax In Denmark, any individual who resides for more than 6 months is required to fulfill tax obligations to the Danish government. For individuals residing in Denmark, they are required to bear comprehensive tax responsibilities. Generally, individuals need to pay state tax, municipal tax, labor market tax, and church tax. Denmark implements a progressive tax rate system for individuals' salary income and capital gains, and this tax rate also varies depending on the city of residence, with the highest tax rate level reaching 52.07%. (1) State tax: It adopts a progressive tax system, divided into two levels, with the tax levied based on individual income. The calculation basis for the lowest tax is the individual's income plus positive net capital income. In 2024, the lowest tax rate corresponding to this basis is 12.01%. For singles, the highest tax base is also composed of individual income plus positive net capital income. However, in calculating the highest tax, 8% labor market tax will be deducted first, and then a 15% tax rate will be levied on the part exceeding 588,900 Danish kroner (2024 standard). (2) Municipal tax: Local income tax, also known as municipal tax, is calculated based on taxable income and uses a uniform tax rate, which varies depending on the city. According to 2024 data, the average level of municipal tax nationwide is 25.067%. (3) Labor market tax: Its tax rate is 8% of individual income. (4) Church tax: Church tax is levied at a uniform tax rate, which varies depending on the city. The average level of church tax nationwide in Denmark in 2024 is approximately 0.65%. This tax is collected by municipal authorities, but it only applies to members of the Danish National Church (i.e. the Lutheran Church). When registering in Denmark, each individual needs to clearly indicate whether they should be included in the collection scope of church tax. (5) Stock tax: According to Denmark's regulations on stock income in 2024, if the amount of stock income does not exceed 122,000 Danish kroner (applicable to married couples), it is taxed at a rate of 27%. Once the stock income exceeds this amount, the tax rate for the excess part will increase to 42%. (6) Other taxes: Here mainly target foreign nationals, such as scientists working in Denmark or sent to Denmark, who can apply for a unified tax rate of 27% for their total salary, and the longest duration of this preferential period can last up to 84 months, but there are many qualification conditions. In addition, the 27% unified tax rate does not cover all income, but is based on cash salary, employer-provided telephone/internet services, taxable value of company cars, and taxable health insurance paid by the employer. For all other income outside of this, it will be taxed according to the regular tax rules. It is worth noting that no deductions are allowed from income subject to the unified tax rate. At the same time, after 84 months, the income will no longer enjoy the preferential unified tax rate, but will be taxed at the regular tax rate. Corporate income tax According to Danish tax regulations, any company registered and established in Denmark is regarded as a tax resident of Denmark, meaning that all its income must be included in the tax scope. Denmark levies a corporate income tax rate of 22% on ordinary businesses, but only allows depreciation and expenses directly related to company operations to be deducted from taxable income. When determining the taxable income, tax exemptions and tax depreciation are first deducted from the total income of the company. It is worth noting that because operating costs and depreciation can be deducted from the tax base, the actual tax burden of the company may be lower than the statutory 22% tax rate. In addition, according to Danish tax law, for permanent establishments (PE) and real estate located abroad, their tax treatment follows the territorial principle. This means that Danish companies do not tax their income worldwide. Instead, the income from permanent establishments located outside Denmark or income from foreign real estate is not included in Denmark's taxable income. For non-resident companies, only profits derived from income obtained within Denmark are subject to taxation. The corporate income tax rate is the statutory 22%. Value-added tax Denmark levies value-added tax on goods and services sold and imported domestically, with a standard tax rate of 25% on the price exclusive of tax for goods or services. However, exported goods and services are exempt from taxation. In addition, Denmark also implements value-added tax exemption policies for some specific services, covering finance, insurance, medical, education, and passenger transportation. For enterprises engaging in VAT-exempt businesses, they do not need to register for VAT and pay, but correspondingly, they also cannot apply for VAT refund on raw materials or services used in such businesses. For enterprises engaging in businesses with a 0% tax rate, although they need to register for VAT, they do not need to actually pay VAT and do not need to include VAT in the pricing of goods or services. At the same time, such enterprises have the right to apply for a refund of the VAT included in the goods or services provided by their suppliers. Consumption tax In Denmark, consumption tax is only required when goods are sold or brought into the country. Any goods brought into Denmark or produced in Denmark...