OIL, GAS & POWER- THE INCREASE AND DECREASE OF CERTAIN TAXES FOLLOWING THE GOAL OF GREEN TRANSITION IN DENMARK 

Energy tax is paid on taxable electricity and taxable fuels consumed in Denmark. 

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In addition to energy tax on taxable electricity and taxable fuels, carbon tax (CO2) is generally also paid on these taxable energy products (excluding electricity). 

Tax on energy products covers: 

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Fuels 

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• Mineral oil products such as petrol, biooil, diesel oil, fuel oil, gas oil etc. (The Mineral Oil Tax Act). 

• Coal products such as hard coal, petroleum coke, waste heat etc. (The Coal Tax Act). 

• Natural gas, biogas and town gas (The Gas Tax Act). 

 

Electricity 

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• Electricity (The Electricity Tax Act).  

  

Energy taxes in Denmark are levied within the framework of the European Union Energy Tax Directive 2003/96/EC, which sets minimum rates for the taxation of energy products in EU member states.  

 

The carbon tax 

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The carbon tax (CO2 Tax Act) follows the energy taxes in the sense that carbon tax is generally levied on energy products (gas, coal and oil), which are also taxable for energy tax. 

The overall purpose of the carbon tax is to reduce the consumption of fossil fuels and thus reduce carbon emissions. 

Carbon tax is payable on most mineral oil products. Companies that are registered under the Mineral Oil Tax Act must also be registered under the Carbon Tax Act.  

The same rules apply for registration under the Mineral Oil Tax Act and the Carbon Tax Act. The same obligations and rights also apply for being registered under the two laws.  

Registration according to the Mineral Oil Tax Act is divided into the following five tax areas:  

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a) Gas and diesel oil, fuel oil, heating tar and kerosene  

b) Gasoline 

c) Gas (LPG)  

d) Carburetor fluid  

e) Lubricating oil and the like.  

  

Companies that are registered as warehouse keepers according to tax areas a), b), c) and e) must also be registered according to the Carbon Tax Act. Companies that are only registered under d) (carburetor fluid) do not have to be registered under the Carbon Tax Act.  

Registration as a consignee under the Mineral Oil Tax Act also includes registration under the Carbon Tax Act.  

Carbon tax is payable on goods subject to tax according to the act on taxation of hard coal, lignite and coke etc., as well as the act on taxation of natural gas and city gas, etc. 

There is also a tax on biogas used as motor fuel in stationary reciprocating engine plants with an input power of over 1,000 kW. 

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Denmark participates in the EU emissions trading system (ETS). Facilities that are covered by the ETS do not pay carbon tax. Heat inputs into district heating plants are, however, subject to the carbon tax, irrespective of whether they are also covered by the EU ETS.  

 

Plans for a new carbon tax have been decided in Denmark   

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As most other countries in the EU, Denmark is focused on the green transition in the energy sector. This impacts the energy taxes.  

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In June 2022 the Danish political parties agreed to implement a new carbon tax for the future.   

The new carbon tax will be extended to areas that are currently exempt from carbon tax, and the existing base deduction in the carbon tax will be abolished as of 2025.  

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With this agreement a new carbon tax with a rate of 750 DKK per ton of emitted carbon will be introduced in 2030 for companies outside the EU’s quota trading system, and 375 DKK per ton of emitted carbon in 2030 for companies inside the system. Mineralogical processes etc. receive a charge of DKK 125 per ton of emitted carbon in 2030. 

At the same time, help will be channeled to the companies in Denmark that are impacted the most by the carbon tax to minimize the risk of emissions and jobs moving abroad.  

The agreement also introduces a minimum price that can come into force if the EU's quota trading market does not deliver as expected.   

The agreement is a contribution to meet the Danish climate goal in 2030.   

  

Reduction of the space heating tax for VAT-registered companies 

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In the area of electricity tax in Denmark there has been a reduction which also aims to contribute to the energy-friendly production. 

Per January 2021, the space heating tax for VAT-registered companies was lowered to DKK 0.004 per kWh. Because of this the charges for space heating and process consumption remain the same. 

There will therefore no longer be tax on electricity-based surplus heat, and companies will no longer have to distinguish between electricity used for process purposes and for heat when you apply for a refund of electricity tax. 

Previously, companies only received a deduction for electricity for heating or cooling if it was used to heat or cool in the production (e.g., stables), but not if it was used to heat or cool for reasons of comfort, (e.g., heating of the company’s canteen). This division ends with the lowering of the space heating tax. As a consequence, companies will no longer have to document how much electricity they have used for each part, and it is therefore not necessary to have independent meters for e.g., production and common rooms. 

  

Special rules for excess heat 

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The rule change makes it simpler and cheaper to run an energy-friendly production, as companies now do not have to pay electricity tax on the surplus heat from the production, which can be used to heat the premises that do not belong to the production. 

  

Continued exceptions to reimbursement 

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The change means that a Danish VAT registered company can basically receive reimbursement for its entire electricity consumption except for the process rate of DKK 0.004 per kWh. 

However, there are still some situations where companies cannot get reimbursement for parts of the electricity consumption. This applies if the company: 

• is a liberal profession (covered by Annex 1 to the Electricity Tax Act) 

• has partial right of deduction for input VAT, 

• is not itself a consumer of the electricity.