background image
6.2. Depreciation and Amortization

When calculating Danish taxable income, the ability to depreciate assets owned by an enterprise and the methods used depend on the type of asset. Depreciation is generally optional.

Immovable Property

In general, buildings used for commercial and industrial purposes are depreciable using the straight-line method. However, buildings used for offices, accommodation (excluding hotels), health care, or for a business in the financial sector are not depreciable. Office buildings adjacent to buildings used for commercial purposes may be depreciated if used together with the depreciable buildings.

The standard depreciation rate is 4% but may be increased to 7% if the building is subject to wear and tear to the extent that it will lose its value within 25 years despite normal maintenance.

Buildings constructed on leased land with a fixed lease period may be depreciated over the period of the lease. If the lease period is not fixed, the rate is 5%. The depreciation of buildings on leased land also applies to the buildings that are not normally depreciable as covered above, excluding buildings for accommodation.

Operating Equipment and Ships

Operating equipment and ships are allocated among asset pools and depreciated using the declining balance method. The asset types and applicable rates include:

  • Standard operating equipment and ships with a gross tonnage of up to 20 metric tons may be depreciated at an annual rate of up to 25%;
  • Ships with a gross tonnage exceeding 20 metric tons may be depreciated at an annual rate of up to 12%;
  • Certain operating equipment with long economic life, such as certain ships, aircraft, and drilling rigs, may be depreciated at an annual rate of up to 15% (17% prior to 2016);
  • Facilities for producing heat and electricity with a capacity of less than 1 MW and wind-turbine generators may be depreciated at an annual rate of up to 25%; and
  • Infrastructural facilities used for transporting, storing, and distributing electricity, water, heat, oil, gas, and waste water, and facilities used for radio, telecommunications, and data transmissions may be depreciated at an annual rate of up to 7%.

Intangible Assets

Acquired goodwill, patent rights, trademarks, and other intangibles may be amortized over 7 years. When used for R&D, intangibles may be written off in full in the year they are acquired.

Accelerated Depreciation

New acquisitions that do not exceed DKK 14,100 or have useful lives not exceeding 3 years are 100% deductible in the year of acquisition.

Effective 1 July 2021, SMEs are allowed to claim full depreciation up to DKK 30,000 (increased from DKK 14,100) in respect of investments made in new and green operating assets. Computer software, operating equipment and ships used for R&D, except operating equipment, and ships used for exploration of raw materials, are also 100% deductible in the year of purchase. Alternatively, such equipment and ships may be depreciated over 5 years using the straight-line method.

Effective 1 January 2018, costs incurred on R&D activities including, machinery and vessels, are allowed to be deducted / depreciated at the following rates:

  • 101.5% for the 2018 and 2019 tax years;
  • 103% for the 2020 tax year;
  • 105% for the 2021 and 2022 tax years;
  • 108% for the 2023 to 2025 tax years; and
  • 110% for the 2026 and future tax years

An increased depreciation at the rate of 116% of the acquisition cost is available to all companies for investments made in new assets between 23 November 2020 and 31 December 2022 (excluding passenger cars, ships, and machinery that run or may run on fossil fuels).

COVID-19 Emergency Measures

In response to the COVID-19 pandemic, the allowed deduction for R&D expenses is increased to 130% for the 2021  and 2022 tax years. The amount of R&D expense that can benefit from the increased deduction is limited to  DKK 910 million in 2021 and 2022, which apply at the group level. R&D expense amounts exceeding the above limits are subject to the standard deductions provided for the 2021 and 2022 tax years, i.e., 105%.

Recapture

The amount of depreciation claimed on an asset may be recaptured on the disposal of the asset, with the recaptured depreciation subject to tax at a rate of 25%. For assets depreciated under the declining-balance method, the consideration received is deducted from the collective declining-balance account.