Denmark provides the following tax incentives:
Companies with a tax loss that may not benefit from the accelerated depreciation of R&D related costs (see Sec. 6.3.) can qualify for a negative tax refund. The refund is equal to the corporate tax rate applied to the negative taxable income that relates to the R&D costs.
From the tax year 2014, the maximum loss for which R&D negative tax refund can be claimed is DKK 25 million (DKK 6.125 Million refund at 24.5% rate). If the taxpayer is part of a group, the limit is applicable to the group as a whole.
In response to the COVID-19 pandemic, Denmark introduced the following relief measures:
Denmark advanced the payments from the R&D tax credit scheme for loss making companies for the year 2019 from November 2020 to June 2020.
The Danish government introduced a compensation program for fixed expenses of businesses suffering a decline in turnover as a result of government restrictions for COVID-19, which includes requirements to close, limit opening hours (restrict access), limit gathering sizes, border closures, or travel restrictions.
As per the order issued in April 2020, the compensation program applied to the period 9 March 2020 to 8 July 2020. In November 2020, the Danish government extended the program until 31 October 2020. However, for companies impacted by border closures and travel restrictions, the program is extended until 31 August 2020.
The program includes that the government will provide compensation for fixed expenses, such as depreciation, rent, interest expense, and contractual expenses (that may not be canceled). The compensation for qualifying fixed costs ranges from 25% up to 80% of the expense amount depending on the nature of restriction and turnover decline. However, if a business is ordered to be closed by the government, 100% compensation for fixed expenses is available, and if a business is ordered to operate for limited hours, 90% compensation for fixed expenses is available. The maximum compensation is in the range of DKK 30 million to DKK 120 million, depending on the nature of restriction and the compensation period.
The following restrictions are applicable with respect to the compensation program:
- No compensation is granted if the turnover decline is 35% or less;
- Fixed expenses must amount to at least DKK 4,000 per month during the compensation period;
- No compensation is granted if the fixed expenses could have been reasonably avoided by the company;
- Companies based in tax havens as defined by EU guidelines are not eligible for the compensation program; and
- Companies receiving more than DKK 60 million compensation in 2020 must not pay dividends or buy back shares during the financial years 2020 and 2021 (unless the compensation is paid back).
Applications for the program can be made with the Danish Business Authority by 1 February 2021 (previously 30 November 2020).
The Danish government introduced another compensation program for fixed local costs incurred by businesses. Under this program, companies registered under the fixed expenses support program before 18 August 2020 can opt for compensation of their fixed local costs for the period from 19 August 2020 until 31 October 2020. This option is not available for companies subject to border closure or travel restrictions.
The compensation for fixed local costs is provided at the rate of 50% of the covered costs (up to a maximum of DKK 50,000 per month). The fixed local costs incurred in Denmark covered under this program include the following:
- Interest and contributions on loans in the property;
- Consumption costs for electricity, water and heating; and
- Property insurance and taxes.
Applications for the program can be made with the Danish Business Authority by 9 December 2020.
The restrictions that apply to the fixed expenses support program are also applicable to the fixed local costs support program.
Further, a statement on actual revenue as well as fixed costs is required to be submitted by 8 April 2021 under both programs.