Inheritance tax is a tax imposed on the value of assets that a person receives as inheritance from a deceased person. The size of the tax can vary depending on the size of the inheritance, the heir's relationship to the deceased, and the applicable national rules.
Frequently Asked Questions About Inheritance Tax
What happens if I receive inheritance from abroad?
If you receive inheritance from abroad, it must be reported to the Danish tax authorities when you are subject to estate or gift tax in Denmark. This means that Danish rules on estate tax (and in certain cases gift tax) may apply, even if the inheritance originates from abroad.
Whether Denmark has the right to collect tax depends primarily on whether the deceased or heir has residence in Denmark at the time of death, and whether there are international agreements that regulate double taxation of inheritance.
Is there Danish inheritance tax if the deceased lived abroad?
If the deceased lived abroad, Danish estate tax is generally not collected on assets located outside Denmark. In such cases, it will normally be the country where the deceased had domicile that has the right to collect inheritance tax.
If there are assets, such as properties or permanent establishments, both in Denmark and abroad, both countries may have taxation rights. In some cases, double taxation can be avoided through relief if the inheritance has already been taxed abroad.
How are inherited assets valued for tax purposes?
Inherited assets are valued at market value at the time of transfer. This value forms the basis for calculating any gain or loss upon a subsequent sale.
It is therefore crucial to be able to document the market value through, for example, estate distribution documents.
Is inheritance from abroad taxable as income in Denmark?
Inheritance from abroad is generally not taxable as income in Denmark. The inheritance is not taxed as ordinary income, and therefore no income tax must be paid on the received funds.
However, estate tax may be payable if the deceased had domicile in Denmark, or if the inheritance includes assets located in Denmark.
Returns and gains later obtained from the inherited assets – for example, interest, dividends, or sale of securities – are taxed according to the ordinary rules for capital or share income.
What is estate tax (boafgift)?
Estate tax is a tax paid on the inheritance when a person dies and the inheritance passes to the heirs. The tax is calculated on the total net assets in the estate after deducting debt and a fixed basic allowance.
It is generally the heirs who are liable for payment, but the tax is normally settled through the estate's accounts and paid by the estate administrator.
If the deceased had domicile in Denmark, the estate tax covers all assets – including those located abroad.
What is the basic allowance and tax rate for estate tax?
For estate tax, there is a basic allowance of DKK 392,300 (2026 rate), meaning the inheritance is only taxable when the total value exceeds this amount.
The basic allowance only applies to heirs who are closely related to the deceased, such as children, parents, or stepchildren. For these close heirs, the estate tax is 15% of the portion of the inheritance that exceeds the basic allowance.
If the inheritance goes to persons who are not closely related – such as nieces, nephews, friends, or others – an additional estate tax of 25 percent is also paid on the amount remaining after the estate tax.
How does relief work for inheritance taxed abroad?
If the deceased had residence in Denmark, Danish estate tax must generally be paid on the entire inheritance – including assets located abroad. If inheritance tax has already been paid in the country where the assets are located, the Danish tax can be reduced or eliminated.
This possibility for relief is set out in Section 9 of the Estate Tax Act, which is intended to prevent double taxation. The relief typically applies to foreign properties or trusts where inheritance tax has already been paid abroad.
In such cases, the Danish Tax Agency can reduce the Danish estate tax by the amount paid abroad, or completely exempt the asset from Danish tax if the foreign tax is equal to or higher.
What documentation is required for inheritance from abroad?
When processing inheritance from abroad, documentation must usually be provided for:
- Death and residence (death certificate and residence certificate)
- Will or declaration of inheritance
- Statement of assets and debts
- Valuations of assets
It may also be necessary to provide translations of foreign documents if they are to be used by Danish authorities. Documentation is important for correct tax calculation.
How are returns and gains from inherited assets taxed?
Although the inheritance itself is not taxed as income, returns and gains from inherited assets will be taxed according to the ordinary rules.
If you inherit shares, bonds, or properties, for example, future dividends, interest, and sales with profit are taxed as ordinary capital or share income.
There are no special rules for inherited assets in this context – taxation follows the general rules for the relevant asset type.
Disclaimer
As the above is for guidance purposes only, we accept no liability for decisions that may be made based on the above without prior individual advice. We accept no liability for errors and omissions.