As a vehicle owner in Denmark, when you rent out your car through platforms like Amovens, you are eligible for certain tax deductions. Understanding your options can help you optimise your tax obligations effectively.
You have the choice between one of the two models for tax deductions on your rental income:
Standard deduction: This is a fixed deduction you can apply if Amovens automatically reports your rental income to the tax authorities.
Accounting-based deduction: Alternatively, you can deduct actual expenses related to the rental activity from your income.
Note: You can only use one of these models in a given tax year.
To promote resource sharing, Denmark has introduced a tax deduction for citizens who privately rent out their cars. The deduction consists of a standard deduction and a percentage deduction. The standard deduction is particularly high for the rental of green vehicles.
In 2024, you have an annual standard deduction of DKK 21,600 (DKK 20,900 in 2023) if you rent out a low-emission vehicle (electric or plug-in hybrid vehicle emitting less than 50g CO2 per km.) and a standard deduction of DKK 11,500 (DKK 11,100 in 2023) if you rent out a conventional vehicle.
The standard deduction is per person, so if, for example, you rent out together with a friend or partner, you have a combined standard deduction of DKK 43,200 or DKK 23,000 depending on the type of vehicle.
Income exceeding the standard deduction also has a 40% deduction, after which the rest of your income is taxed as other personal income.
You rent out alone an electric or plug-in hybrid vehicle for DKK 30,000 a year and must pay DKK 2,520 in tax.
Rental income: 30,000 DKK
Standard deduction: -21,600 DKK
Amount after standard deduction: 8,400 DKK
40% deduction: -3,360 DKK
Taxable income (after deductions): 5,040 DKK
Tax (at 50% tax rate): 2,520 DKK
You rent out a gasoline vehicle for DKK 20,000 a year and must pay DKK 2,550 in tax.
Rental income: 20,000 DKK
Standard deduction: -11,500 DKK
Amount after standard deduction: 8,500 DKK
40% deduction: -3,400 DKK
Taxable income (after deductions): 5,100 DKK
Tax (at 50% tax rate): 2,550 DKK
The standard deduction is shared for the rental of cars, boats, and campervans but is not affected by the deduction used for the private rental of holiday and year-round homes.
If multiple people's standard deductions are used, be aware of the rules for gift tax, especially if these people are not either your spouse, housemate, parents, or child. It is a requirement that you share the income from the rental if multiple people's standard deductions are used.
If you choose the accounting-based deduction, you can deduct expenses related to the rental of your car from your total annual rental income. This is done by calculating what percentage of the car's total annual mileage is accounted for by rental usage.
For example, if the car's rental usage is 20% of its total annual mileage, you can deduct 20% of your total annual expenses for operating and maintaining the car, as well as the car's estimated annual depreciation.
You can deduct the portion of your expenses for operation and maintenance that relates to the rental. These expenses might include costs for service, tires, green vehicle tax, insurance, interest expenses, lease payments, initial payments, etc.
Based on the example above, where rental usage constitutes 20% of the car's total mileage, you would thus be able to deduct 20% of your expenses associated with operation and maintenance from your total annual rental income before declaring the income on your tax return.
You can also get a deduction for a proportional part of the car's estimated annual depreciation.
The deduction for the estimated annual depreciation is likewise calculated by determining what percentage of the total annual mileage is accounted for by rental usage. This percentage can also be deducted from your total annual rental income before you declare the income on your tax return.
As a prerequisite for using the accounting-based deduction, you must keep accounts and save receipts for all expenses related to the car during the income year. This serves as your documentation that you are entitled to the deduction.
Additionally, you must maintain a logbook to calculate the percentage of your expenses that relates to the rental of the car. In the logbook, you should note the car's mileage at the beginning and end of the income year, as well as the mileage before and after each rental. The mileage at the start and end of your rental agreements is shown in the rental contract for each rental when you use the contract in our app. You can find the contracts for your previous rentals under the "Rental" section on your profile.
The accounting-based deduction is common for the rental of cars, boats, and campervans. However, this deduction is not affected by the deduction used for the private rental of vacation and year-round homes.
You cannot get a deduction for a loss. If your annual expenses exceed your annual rental income, you should not declare anything on your tax return.
Shared deductions: The deduction models are shared across different types of rentals (cars, boats, campervans), but not with private residential rentals.
Gift tax rules: Be aware of gift tax regulations if multiple non-family members use the standard deduction.
VAT registration: If your rental income exceeds DKK 50,000 within 12 months, you must register for VAT.
Since January 1, 2023, the DAC7 EU directive mandates that digital platforms like Amovens collect, verify, and report tax information for their users. Amovens will handle this automatically for you, ensuring compliance with Danish tax laws.
By understanding and utilising these tax rules, you can ensure that your car rental activities are both profitable and compliant with Danish tax legislation.
Disclaimer: This article is intended for guidance only and does not constitute legal advice. For specific guidance related to your circumstances, please contact your local tax authority.
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