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April 2019.

What was the reason for your choice of residence in Denmark? Because your friends and family live there? House prices? Is it the job location or just purely by chance? For us, it was the local tax rate.

Many years ago, I came to Denmark with my Danish husband to buy our new home in Copenhagen. He kept repeating, again and again: "It should be in this area because the local tax rate is the lowest in the country". Can you guess where the local tax rate is lowest in Denmark?

The highest and the lowest

The answer comes here with a list of the top 20 municipalities with the highest and lowest local taxes: municipal and land taxes. Church tax is not included due to its insignificant share in the total local tax. You can read the whole list Here.

Of the 20 municipalities with the lowest municipal tax, 17 are from the capital region and Northern Zealand. Communities with the highest tax rate often are remote regions and islands, e.g. Langeland, Bornholm, and Læsø.  It follows the logic that the more people there are in the region, the less municipal tax you pay. For foreigners, it also means more population diversity and more job opportunities.

Not only do the rural regions pay top municipal taxes, but they also pay top land taxes in 18 out of 20 municipalities. You might get a cheap property, but that will be offset by your annual land tax for many following years. It is worth mentioning that church tax, although not significant, is also higher in the countryside than in the city.

Many communities on the top 20 lowest municipal tax list are on the cheaper side of the housing segment, for example, Glostrup, Herlev, and Greve. The people living in these areas not only pay lower municipal taxes; some of them also pay lower land taxes. That is the case for Greve, Brøndby, and Solrød. Absolutely, the winner is Gentofte, the municipality that pays the least land tax and the third lowest on municipal tax.

Are they happy there?

Low-taxed municipalities are often home to people with high income, business owners, and likely Conservative party supporters. Taxes to the local authority are only a few of the many taxes they must pay: top tax for high earners, tax on capital income, inheritance tax, etc. That is why the demand for lower taxes has been repeated year after year in these municipalities, despite their local taxes being among the lowest in the country.

Denmark is a socialist country; tax revenue is regulated from rich to poor regions. According to the law (Lov om kommunal udligning og generelle tilskud til kommuner), rich municipalities must contribute 61% of their budget surplus to support the municipalities with a budget deficit. Additionally, wealthy municipalities in the capital region must pay an extra 27% of their surplus to poorer neighbouring municipalities. That is too much for Gentofte. Its mayor, Hans Toft, has made his personal crusade to reduce its contribution. And guess where he is from? Struer in Jutland, a recipient of this scheme for nearly half a billion kroner annually.