Living in Denmark: tips, challenges and questions

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Rangle
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Re: Living in Denmark: tips, challenges and questions

Post by Rangle » Thu Mar 09, 2017 11:42 am

Eureka wrote:
thedollar wrote: Bad:
- Have to wait until age 67-74
If you make your ratepension account now, you can start withdrawing from it when you turn 62 - also if the general retirement age (folkepensionsalder) increases at a later time. So if you don't have any ratepension account yet, I suggest you make one - even if you only deposit peanuts in it. Same goes for aldersopsparing. Better just make one.

I have a ratepension that I can withdraw from when I turn 60 as the rules were like that when I made the account.
Is that so? From Forsikring Og pension
Personer født den 1.7.1960 og senere
Kapitalpension og aldersopsparing kan tidligst udbetales 5 år før folkepensionsalderen og senest 15 år efter pensionsudbetalingsalderen. Ratepension og livrenter kan tidligst begynde at blive udbetalt 5 år før folkepensionsalderen, og sidste rate skal senest udbetales 25 år efter pensionsudbetalingsalderen. Der er ingen seneste aldersgrænse for udbetaling af livrenter.
From nordnet
Pensionsalder er 67 år, medmindre andet er aftalt. Første rate af pensionsudbetalingen finder tidligst sted på det tidspunkt kunden når pensionsudbetalingsalderen, medmindre lavere aldersgrænse er godkendt af Skatterådet.
Seems that could easily be changed?

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Thu Mar 09, 2017 1:22 pm

:oops: oops, you are right.

I fell into the trap of thinking that whatever applies to me applies to anybody else too.

From skat:
Hvis ratepensionen er oprettet før 1.maj 2007, kan pensionen udbetales ved det 60. år. Er ratepensionen oprettet efter 1. maj 2007, kan pensionen udbetales, når du har nået pensionsudbetalingsalderen
So unless you made your account 10 years ago maybe not so smart after all ...

thedollar
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Re: Living in Denmark: tips, challenges and questions

Post by thedollar » Thu Mar 09, 2017 2:49 pm

I've been doing some more math for us danes.

This time regarding the impact of the capital gain tax and its effect on time to retirement.

Blue line is for 0% tax (as used in the US).
Red line is for 100k annual spending after retiring.
Grey line is for 200k annual spending after retiring.
Yellow line is for 300k annual spending after retiring.

Image

So it seems that low spending and high savings rate is even more important in Denmark.

i.e. at a 50% savings rate:
0% tax: 16.6 years
100k spending: 20.0 years
200k spending: 21.9 years
300k spending: 22.4 years

Rangle
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Re: Living in Denmark: tips, challenges and questions

Post by Rangle » Fri Mar 10, 2017 9:19 am

Very unfortunate I had a "kapital pension" account from before 2007 with a small amount invested which I sold. That meant the whole account was closed, and as such I apparently have no way to "restore" the account to benefit from the old rules :oops:

Guess I forgot to read the part in small print.

Rangle
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Re: Living in Denmark: tips, challenges and questions

Post by Rangle » Mon Mar 13, 2017 3:01 am

By the way. Have you tried the "iværksætterkonto" as a savings / means to passive (bond) income? I can not quite figure out how big the implications would be on my personal finances with 50k a year and then at 67 yr figure out that it is not possible for me to figure out this entrepreneur thing. Thought it would be nice to have and if no brilliant idea came to the surface, they could be invested in rentals - but it seems that is not possible. What are your thoughts?

Rabie
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Re: Living in Denmark: tips, challenges and questions

Post by Rabie » Fri Mar 24, 2017 6:30 pm

Hi,

Another Dane on the path to Fi :) Quick Intro: 28 year old male. Started full time work as a software engineer in 2014. Became aware (and to some extend obsessed by the idea) of ERE around June 2016. This is where I also started tracking expenses and cutting unhealthy expenditures. My savings rate for 2016 ended with 24% of my total income, and for 2017 I will most likely end at around 45% as I'm still being dragged by some of my bad decisions of the past. From there on my expenses are on track for a 60% rate, and this is without really feeling that I am depriving myself. Ironically I feel more liberated!

I have spent a bit of time trying to understand the danish tax system and discovered a strange special case with regards to capital gains. Suppose you have reached FI and thus have no other income except from capital gains from private funds invested in some danish mutual fond. The first 51.700kr earned will be taxed 27% (as of 2017). Anything above that is usually then taxed with 42% but since you don't have any other sources of income it seems that the first 38.444kr above the 27% tax boundary is tax free. Any kroner earned above 90.144kr (51.700+38.444) is then taxed 42%. This is quite significant for us trying to reach FI! :)

I used this site and downloaded the available spreadsheet:
https://tax.dk/beregn/skat17.htm
Last edited by Rabie on Sat Mar 25, 2017 5:18 am, edited 1 time in total.

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Sat Mar 25, 2017 3:57 am

Welcome Rabie, nice you found your way in here!

As for the weird tax rule, you mention, my gut feeling says that something is wrong with the calculator.

If you have only capital gains (kapitalindkomst), a common example is a child getting interest from a bank account, then you don't pay tax until you reach the free allowance of your personal income tax (bundfradrag). This will also apply to you if you invest in a mutual fund based on bonds and don't have any salary income. Then you will not pay tax of the first money you make (up to the free allowance).

The tax rates you mention (27% and 42%) do, however, relate to equity income (aktieskat). And this tax is kept completely separate from personal income tax and here there is no free allowance. Also not if you do not have any other income.

Or did I misunderstand you?

thedollar
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Re: Living in Denmark: tips, challenges and questions

Post by thedollar » Sat Mar 25, 2017 3:58 am

Welcome @Rabie

You are right. I have plotted the effective tax rate when your only income is capital gains:

Image

Also, in this situation you will pay 352 kroner less in tax each year if you choose to be a member of the church and "pay" church tax. So weird.

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Sat Mar 25, 2017 4:25 am

Hi both of you,

What do you mean by "kapitalindkomst"/capital gain? You are taxed differently depending on whether the income is from stocks or bonds and interest and you need to keep those separate.

Also, why would you save money by paying church tax? Please do not refer to this random calculator, but to rules/regulations or talk me through the numbers.
Last edited by Eureka on Sun Mar 26, 2017 6:37 am, edited 1 time in total.

wizards
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Re: Living in Denmark: tips, challenges and questions

Post by wizards » Sat Mar 25, 2017 5:14 am

@thedollar - the chart looks like aktieindkomst...

@eureka - the reason for the church tax reduction is that you get the tax value of the basis deduction when you use this only for stock income taxed by 42%... So a person who only have stock income, will earn from being a church member... (Weird but true)

@Rabie - welcome :)

Rabie
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Re: Living in Denmark: tips, challenges and questions

Post by Rabie » Sat Mar 25, 2017 5:17 am

Sorry for the confusion Eureka. What I meant is that this applies to "aktieindkomst" and not to "kapitalindkomst" since as you correctly state, that would fall into a different taxation rule (the 37% on positive gains). I tried entering some of the same info as you see with the plot of thedollar into the official tax site (though this is for 2016) and got similar results. Note that for 2016 the 27% limit is 50.600kr.

https://www.tastselv.skat.dk/borger/ber ... filServlet

This is what Skat.dk says. For 50.600kr earned as "aktieindkomst" you pay 27% which is 13.662kr. So now any kroner you earn on top of the 50.600 should in theory get taxed 42%, but this is not what I get when I enter 70.000kr as "aktieindkomst". As you see the tax you have to pay is still 13.662kr. If you play for enough time with entering numbers into their (cumbersome) website, you will find the tax free limit before the 42% rule actually kicks in.

https://postimg.org/image/8wlmfgibn/

https://postimg.org/image/tribdzz35/

Rabie
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Re: Living in Denmark: tips, challenges and questions

Post by Rabie » Sat Mar 25, 2017 5:18 am

Thanks for the welcome (and quick replies!) :)

wizards
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Re: Living in Denmark: tips, challenges and questions

Post by wizards » Sat Mar 25, 2017 6:45 am

@Rabie - the reason for this is because you aren't using the basis deduction (personfradrag) to other type of income - try putting a salary of 50k or interest income of 45k and you will see the 42% tax right after 50,6k (2016 numbers)

Rabie
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Re: Living in Denmark: tips, challenges and questions

Post by Rabie » Sat Mar 25, 2017 7:10 am

This is what I suspect too based on playing with adding other types of income. I just find it strange/confusing that the deduction only kicks in when you get to the 42% tax limit. Not very intuitive rules, at least from my current perspective. But anyway, if this rule still applies in the future I can use this to either decease the risk of failure (depleting my funds) or retiring earlier than otherwise calculated. It would be nice to get some kind of professional approval of whether this rule applies or is just a mistake of some sort. Maybe I should give Skat a call.

wizards
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Re: Living in Denmark: tips, challenges and questions

Post by wizards » Sat Mar 25, 2017 7:18 am

It does applie. :)

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Sun Mar 26, 2017 7:09 am

Thanks all and sorry for my tone.

I guess I must stop talking about things I have no clue about and move to a place where the tax rules are simpler ;)

lolxor
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Re: Living in Denmark: tips, challenges and questions

Post by lolxor » Tue Apr 18, 2017 10:09 am

Rabie wrote:
Fri Mar 24, 2017 6:30 pm
a strange special case with regards to capital gains
Hi all. Late to the party but I've discussed this exact issue with a few other Danes in the past. The weird application of the standard deduction when you only have stock income is indeed weird :)

What it means though is that if you can indeed get by on less than approx 40,000 kr per year then you can get that completely tax free by structuring your investments to pay out as capital gains (bonds or ETF's generally). If you need 40-83,000 kr then you can start adding stock income and still keep your effective tax at about 15%. If you are above 83,000 kr then it doesn't matter much if you utilize income from stocks or capital gains since you will be able to utilize your standard deduction either way :)
Rabie wrote:
Sat Mar 25, 2017 5:17 am
If you play for enough time with entering numbers into their (cumbersome) website
I found it cumbersome too since you had to reenter your birthday every time as well as membership of the church and municipality. I did what any of us nerds would do and created a spreadsheet to calculate the tax myself :) It's embedded on this site: Simple tax estimates

You can play around with it there. I think you should be able to download it too but if not just let me know and I'll put a downloadable copy up here or there.

herp
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Re: Living in Denmark: tips, challenges and questions

Post by herp » Tue Apr 18, 2017 11:06 am

@lolxor

What a great site you've put together. I really like the content available on firedk.com!

lolxor
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Re: Living in Denmark: tips, challenges and questions

Post by lolxor » Tue Apr 18, 2017 3:01 pm

herp wrote:
Tue Apr 18, 2017 11:06 am
@lolxor

What a great site you've put together. I really like the content available on firedk.com!
Thanks a ton & glad you like it! I'm working on putting more up, but am pretty busy at my job and some courses at the moment.

Rabie
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Re: Living in Denmark: tips, challenges and questions

Post by Rabie » Wed Apr 19, 2017 12:54 pm

@lolxor cool site!

Reading the comments section of http://firedk.com/blog/2017/03/why-redu ... -can-make/ post cleared some of my questions regarding the tax system :)

herp
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Re: Living in Denmark: tips, challenges and questions

Post by herp » Tue Jun 20, 2017 12:39 pm

Looks like there's quite a few upcoming changes to our retirement system. What stood out to me was a significant degradation of aldersopsparing, capping the contributions at 5k yearly (down from roughly 30k now) unless you are 5 years from retirement, in which case you can contribute up to 50k yearly.

There's a handful of changes to folkepension as well as other things. I guess we will have the full picture once the agreement text is public.

EDIT: Here's the full text https://www.fm.dk/~/media/files/nyheder ... kedet.ashx

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Wed Jun 21, 2017 12:51 am

OMG, this country seems like a huge control freak. So much regulation to try to force people to work more. And to stay within the country all their lives.

I wonder if we will see an increased number of people who take charge of their own lives and themselves decide when and where and how much they work - or if they just follow orders and do as told.

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FBeyer
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Re: Living in Denmark: tips, challenges and questions

Post by FBeyer » Wed Jun 21, 2017 9:40 am

Eureka wrote:
Wed Jun 21, 2017 12:51 am
OMG, this country seems like a huge control freak. So much regulation to try to force people to work more. And to stay within the country all their lives.

I wonder if we will see an increased number of people who take charge of their own lives and themselves decide when and where and how much they work - or if they just follow orders and do as told.
What I fear the most out of all catastrophic scenarios is what happens when the government finds out that it is indeed possible to become FI in Denmark.
There is almost no doubt in my mind that we are going to be labelled as traitors and leeches and someone will come up with a way of removing the personfradrag for everyone who only has investment income.

Just you wait...

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Re: Living in Denmark: tips, challenges and questions

Post by jacob » Wed Jun 21, 2017 10:31 am

As far as I understand the rules (which are constantly changing), I already fall between the cracks in terms of location freedom insofar I desire any pension payments. I'm not really counting on any but I will accept free money if available.
  • I've earned enough points to get a pension (social security) in the US. However, by various treaties, the US pension payments (as a Danish citizen) is available to me IF AND ONLY IF I live in either Denmark or the US. (Unlike if I was Swedish or Norwegian in which case I could live in almost any country, different treaty. BTW, Denmark is one of just a few countries that has the worst treaty with the US for pension payments, Belgium is another one.)
  • Since I haven't lived in Denmark since I was 24 and since I will not be able to live in any EU country for at least 30 years between now (I'm 41) and the official retirement age, the only way to get a Danish pension would be for me to move to Denmark and stay there for 3 years to qualify. This option is currently impossible due to the "greater attachment"-rule for familiesammenfoering as DW would not qualify for a resident visa. The alternative is to go to another EU country and work [and pay into the system] there for 3 years. (It's conceivable that being a gradstudent in Switzerland for 4 years would qualify as a break here.)
All this will probably change again some years from now.

However, it's quite clear that many [first-world] governments currently dislike "people from other countries" as well as people who don't depend on their systems.

I should note in that regard that while most countries offer a "fat cat"-visa for people who are worth $1M+, there are several countries that offer "retirement/pensionada"-visas or "person of independent means"-visas on a rollover basis for ERE sized net worths ($25-300k), e.g. Malta, Panama, Belize, Mexico, Thailand, Ecuador, ...

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Wed Jun 21, 2017 1:59 pm

Jacob, you are even worse off than that.

A new rule (found in the document herp linked to above) says that in order for you to quality for full Danish public pension, you must have stayed in Denmark 90% of the time between age 15 and your official (and ever increasing) pension age, which is currently 68. That is, you are only 'allowed' to leave our little paradise prison for max 5.3 years in total. Stays in other EU countries and Switzerland do not count towards Danish pension rights. There are no obligations what so ever to pay into anything, though, you just need to be here year in, year out.

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