The equalisation tax will only be imposed on pension holders who retire before 2020 and who receive large payouts.
The equalisation tax includes the following elements:
- The equalisation tax is set at 4 %.
- After a basic allowance of DKK 379,000 (2016), equalisation tax is imposed on the total pension payouts, corresponding to what the medium-bracket and top-bracket tax limits would have been in 2010 without including the so-called Danish Spring Package 2.0. A spouse who does not fully use his or her basic allowance may transfer up to DKK 126,700 (2016) of the basic allowance to the other spouse.
- The total duration of the equalisation tax is 9 years. The rate of 6 % is maintained at the same level for 4 years, i.e. from 2011 to 2014. From 2015 onwards, the equalisation tax will be phased out by 1 percentage point annually and will thus be completely phased out in 2020.
- Equalisation tax is not imposed on payouts from endowment pension plans or disability pension plans.
Optimise your payouts
If the equalisation tax affects you, you can optimise your payouts in a number of ways and thus reduce or completely avoid having to pay the tax:
- You can transfer any unused basic allowance from your spouse and thereby reduce or eliminate the taxation.
- You can extend the payout period of your instalment pension from, for instance, 15 to 20 years or convert it into a life pension. This reduces the annual payouts and therefore also the equalisation tax.
- You can increase your liquid assets. This ensures that part of the savings is not included in the tax base and therefore unaffected by the equalisation tax.
- Some might benefit from transferring part of their pension payments to a savings plan where their pension payments are taxed instead of their pension payouts.