More companies operating in Denmark are choosing to include employee shares as part of their remuneration packages. This has become a popular approach to motivating and retaining staff, as it enables employees to become co-owners of the business and share in its financial success.
However, the Danish rules on taxation and reporting of employee shares and stock options can be complex. In this post, we provide a clear overview of the main regulations under Danish tax law, including the differences between sections 16, 28 and 7P of the Danish Tax Assessment Act (Ligningsloven), and explain what companies doing business in Denmark need to know about reporting through eIndkomst and eKapital.
What are employee shares?
In Denmark, employee shares (medarbejderaktier) are shares that companies may allocate to their employees, either as part of the salary package or by offering the opportunity to purchase shares at a value lower than the fair market price.
These schemes are regulated under the Danish Tax Assessment Act, and both taxation and reporting must follow Danish Tax Agency (Skattestyrelsen) requirements.
Taxation of employee shares and share options
Danish Tax Assessment Act sections 16 and 28
Under Danish tax law, an employee may be granted a share option with the possibility of receiving shares if certain conditions are met, for instance continued employment or achieving a specific profit target.
In such cases, taxation is typically determined by section 28 of the Danish Tax Assessment Act. The employee is taxed when the option is exercised or transferred. The taxable income is the difference between the market value at the time of exercise and the price paid by the employee. This amount is taxed as personal income, which for high earners in Denmark can reach approximately 55 to 56 percent, including the Danish labour market contribution (AM-bidrag).
Alternatively, if an employee receives shares directly as part of their employment, they are taxed under section 16 based on the market value of the shares at the time the right is vested, minus any personal contribution.
Reporting in eIncome (eIndkomst)
Under Danish reporting rules, companies must report the taxable value of employee shares and related rights through eIndkomst, the Danish online income reporting system.
- For shares and rights under section 16, the value must be reported in the year of vesting (income type 50, code 068)
- For subscription or purchase rights under section 28, the value must be reported in the year of exercise or transfer (income type 51, code 068)
- If the precise value cannot be determined at the time of reporting, field 40 must be ticked.
It is important for all companies operating in Denmark, including foreign employers with Danish employees, to ensure that reporting aligns with the latest guidance from the Danish Tax Agency.
Deferred taxation under section 7P
Unlike the schemes covered by sections 16 and 28, the Danish Tax Assessment Act section 7P allows for deferred taxation. This means that tax is postponed until the employee sells the shares, provided the deferral is clearly stated in a written agreement between employer and employee.
To qualify under section 7P, the following conditions must be met:
- A specific written agreement is in place between employer and employee
- The awarded right may not exceed 10 percent of annual salary, or 20 percent if at least 80 percent of employees are included in the scheme
- Since 2021, small and start-up companies registered in Denmark may allocate shares up to 50 percent of annual salary, provided the conditions in section 7P(3) are met
- The rights must not be transferable
- The award must form part of an employment relationship in Denmark
- Board members are generally not eligible for section 7P treatment.
Note: Many international share programmes do not automatically qualify under Danish section 7P, as they may lack the specific legal requirements such as the non-transferability clause or an explicit reference to section 7P in the agreement. Foreign employers with Danish employees should therefore review and, if necessary, amend their agreements to ensure compliance with Danish rules.
Reporting in eIndkomst under section 7P
For awards falling under section 7P, companies must tick field 40 in the eIndkomst salary report and use income type 0101.
As the reporting requirements may be updated, employers should always consult the latest forms and instructions from the Danish Tax Agency.
Reporting employee share schemes in eKapital
In Denmark, reporting obligations for employee share schemes were extended from 2019, following changes in the Danish Tax Reporting Act (Skatteindberetningsloven) sections 8 and 28.
This means that companies, including foreign entities employing staff in Denmark, are required to report the following via eKapital:
- Allocation and acquisition of shares covered by sections 16, 28 and 7P
- Exercise of purchase or subscription rights
- Any transfer of shares to the employee, for example through vesting or exercise.
Responsibility for reporting lies with:
- The employing company in Denmark
- The parent company, if applicable.
When reporting under section 7P, it must be specified whether the allocation represents up to 10 percent, 20 percent, or (for qualifying new businesses) 50 percent of annual salary.
From 2025, companies may opt to submit reports on an ongoing basis instead of once annually.
Incorrect or missing reporting may result in penalties and inaccuracies in the employee’s Danish tax assessment.
Need advice on Danish tax and reporting?
At Azets, we have experienced consultants who can advise on all matters related to Danish accounting, VAT and tax. We also have extensive experience in eKapital reporting and can assist your business in ensuring correct and timely compliance with Danish legislation, helping you avoid costly mistakes and sanctions.
