Joint Taxation

For companies to be included in joint taxation, the following conditions must be met:

• There must be a group relationship (the parent company directly or indirectly owns more than 50% of the capital and voting rights in the subsidiary).

• The group relationship must have existed for the entire income year.

• For national joint taxation, the companies must be domiciled in Denmark.

• For international joint taxation, participation is voluntary and entails a 10-year commitment period.

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When companies participate in joint taxation, they are treated as one taxable entity. This means that positive and negative results across the companies are offset against each other. In practice, the parent company, also referred to as the administration company, is responsible for reporting and paying tax for the entire joint taxation group.

In Denmark, joint taxation is mandatory for Danish group-related companies, while it is voluntary to include foreign companies in the scheme. Joint taxation covers the entire income year and requires that the companies have a group relationship throughout the period.

Advantages of joint taxation

The main advantage of joint taxation is the ability to utilize intra-group losses. If one company in the group generates a loss, it can be offset against the profit of another – thereby reducing the overall tax payment.

In addition, joint taxation provides simplified administration, as the entire group reports collectively via the administration company. This makes it easier to plan and manage tax payments and provides a better financial overview.

Disadvantages and risks

Joint taxation also entails joint liability, meaning that all companies in the group are liable for the total corporate tax in the group. If one company cannot pay its share in taxes, the others may be required to cover the remaining amount.

Furthermore, the shared tax treatment means that companies lose some individual flexibility. Decisions in one company can have consequences for the group, which requires greater internal coordination and documentation. There is also a certain complexity in terminating joint taxation, especially in connection with restructuring, acquisition, or disposal of companies.

International joint taxation

International joint taxation allows for the inclusion of foreign subsidiaries and permanent establishments in Danish joint taxation. The scheme is voluntary and can be advantageous if the group has foreign losses that it wishes to offset against Danish taxable income.

However, the scheme comes with significant obligations. Among other things, there is a 10-year commitment period, and previously deducted losses may be subject to recapture if the joint taxation arrangement is terminated. In addition, there is a considerable administrative burden, as the rules require close documentation and coordination between multiple countries’ tax systems.

Contact us

If you have questions about the impact of joint taxation on your company or how to structure your corporate group most effectively, contact us – we provide expert advice to ensure compliance and optimize your tax planning.

Frequently Asked Questions

1. What is joint taxation?

Joint taxation is a tax arrangement where group-related companies are taxed as one unit, allowing profits and losses to be offset across the group.

2. Who can participate in joint taxation?

Companies with a group relationship where the parent company directly or indirectly owns more than 50% of capital and voting rights, and where the relationship has existed for the entire income year.

3. Is joint taxation mandatory?

Yes, for Danish group-related companies, national joint taxation is mandatory. International joint taxation is voluntary.

4. What are the benefits?

The ability to utilize losses within the group and reduce overall tax liability.

5. What are the disadvantages?

Joint liability, reduced individual flexibility, and increased administrative complexity—especially for international joint taxation.

6. What does international joint taxation involve?

The option to include foreign companies in Danish joint taxation, but with a 10-year commitment period and the risk of recapture of previously deducted losses.

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