Denmark vs. Spain: Where Are Taxes Lower?

We analyse how tax systems work in Denmark vs. Spain to give you a clear, simple overview. Moreover, we help you identify which country suits your profile, whether as a worker or entrepreneur.

In this guide, you’ll discover which country has a higher VAT, how business activities are taxed, which inheritance taxes apply, and why Denmark ranks among the most expensive countries to buy a vehicle.

Taxes for businesses or legal entities

Denmark operates a deduction system mainly focused on consumption and personal income, reducing the burden on companies. Therefore, operating costs remain relatively manageable for businesses.

Meanwhile, Spain applies a model where companies bear the highest tax burden. To help you understand both systems better, we explain the details below.

Corporate tax in Denmark vs. Spain

This is the main tax companies must pay and it taxes corporate profits in each country. In Spain, most companies pay a 25% rate, although reduced rates apply in specific cases.

For example, new companies pay only 15% during their first two years, encouraging entrepreneurship. Meanwhile, investment funds and SICAVs pay just 1%, while credit institutions and hydrocarbon companies face a 30% rate.

Denmark stands out significantly from Spain in this regard, as the standard corporate tax rate is 22%; this is a government strategy aimed at fostering local entrepreneurship and attracting foreign investment.

VAT (Value Added Tax)

This tax applies to consumption through businesses, which act as collectors for governments. The difference between Denmark and Spain lies in the rates structure, with Spain being more flexible when it comes to basic products. Let us explain it in more detail.

Denmark applies a single 25% rate for all goods and services. In Spain, however, there are three rates: the standard rate of 21%, the reduced rate of 10% and the super-reduced rate of 4%, which means that businesses are required to classify their products and services in detail.

Social security tax

Here, the difference in social security contributions between each country become clear. Spanish companies face contributions of nearly 30% on each employee’s gross salary.

In contrast, Denmark imposes an employer burden of only 0,7%. This low rate is due to the fact that social security contributions in this Nordic country are funded through personal income tax, which enables companies to offer higher take-home pay.

Business Activity Tax (IAE)

Spain delegates this business activity tax to various local councils across the country. Each of these charges business, professional or artistic activities in a specific way, and only those with a net income exceeding 1 million euros per year are liable for payment.

Additionally, companies remain exempt during their first two years, supporting new businesses. Denmark, however, does not charge business activities directly, but applies tax to commercial land value.

Property tax

Spanish local councils set property tax rates between 0,4% and 1,1% for urban properties. This is applied directly to the property’s assessed value and depends on the location, size and age of the building. The payment is made annually, regardless of whether the property generates income or not.

Meanwhile, Denmark applies the Grundskyld or land value tax, focusing only on land. Each local council sets its own rates, which usually range from 1,6% to 3,4% of the land value.

Taxes for individuals or natural persons

Taxes for Danish and Spanish citizens differ significantly, as Denmark applies higher rates balanced by strong public services.

Meanwhile, Spain uses moderate rates but multiple taxes covering income and inheritance. Here’s a detailed breakdown:

VAT in Denmark vs. Spain

Under the Danish model, the rate is fixed at 25% with no exceptions; in Spain, however, a three-tier system applies, setting a standard rate of 21%, a reduced rate of 10%, and a rate of 4% for essential goods, primarily certain natural foods.

Denmark vs. Spain: Where is personal income tax lower?

Personal income tax represents Denmark’s main revenue source, explaining its high rates.

The maximum rate can reach 60.5%, resulting from the sum of several tax brackets: the national rate (between 12.10% and 27.10%), the local rate (approximately a fixed 25%) and an additional 15% tax on income exceeding 588,000 kroner per year. All these deductions are applied cumulatively to the employee’s income.

In Spain, taxation operates on a progressive basis, with tax brackets starting at 19% and rising to 47% for middle and high incomes, i.e. those exceeding €300,000 ($351,163).

How do inheritance taxes work in Denmark and Spain?

Under the Spanish model, this tax is devolved to the autonomous communities, which are responsible for its administration, collection and setting the rate. The tax scale is progressive, ranging from 7.65% to 34% for estates valued at approximately €800,000 ($936,436) or more.

However, the application of the scale depends on strict criteria such as family relationship, with heirs being classified into groups; children, parents, spouses and grandchildren are those who benefit from 99% allowances or high exemption thresholds.

Denmark uses a centralised system with fixed rates and an exemption threshold. In addition, there is a tax-free allowance of 333,100 Danish kroner, which means that anyone whose income exceeds this amount is liable for tax. Here’s how the group stage works.

• Group A: first-degree relatives by blood, such as children, grandchildren, parents and cohabiting partners who have lived together for more than two years, paying a fixed rate of 15%. In the case of spouses, a full tax exemption applies regardless of the amount inherited.
• Group B: this includes siblings, uncles and aunts, nephews and nieces, or unrelated individuals, who must pay, in addition to the 15%, a supplementary tax of 25%, making a total of 40% on the inheritance.

Wealth and large fortunes tax

The difference in how accumulated wealth is charged in the two countries reflects two tax models with different approaches. Spain levies a tax on the ownership of property, whilst Denmark levies a tax on the income it generates.

Specifically, in Spain there is a progressive scale ranging from 0.2% to 3.5%, which is administered by each autonomous community. However, to prevent large fortunes from being exempt from tax, the government introduced an additional tax on net wealth exceeding 3 million euros.

Denmark abolished the wealth tax several years ago in order to encourage saving and the investment of savings. However, if that capital generates interest, dividends and profits, the tax rate can be as high as 42% if certain thresholds of 61,000 Danish kroner are exceeded.

Vehicle registration tax

Denmark applies some of the highest vehicle taxes globally, reaching up to 150% depending on price. The pay scale for 2026 is set out as follows:

• Up to 70,000 Danish kroner –25%
• Cars worth more than 70,000 Danish kroner –85%
• Luxury cars –150%
• Exemptions: certain vehicles with sustainable features, such as electric cars, pay a rate equivalent to 40% of the total tax.

In Spain, however, the tax regime for vehicle purchases is moderate, with the aim of penalising pollution in particular. However, it also establishes a ranking based on CO2 emissions per kilometre, as shown below:

• 0% for cars emitting less than 120 g/km
• 4.75% for emissions between 121 and 159 g/km
• 9.75% for emissions between 160 and 199 g/km
• 14.75% for the most polluting cars emitting over 200 g/km.

Tax comparison: Denmark vs. Spain

The following table summarises how tax systems work in Denmark and Spain.

Similarly, in the table below, you will find specific details regarding the tax burdens faced by companies in both countries.

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