What is the deduction for foreign loans?

Aske Buemann

CEO & Co-founder

Deductions for foreign loans

The deduction for foreign loans is not seen very often, but when it is available, the deductions can add up to a lot of money. For example, one family had a loan with Bank Norwegian where they had missed a deduction of DKK 135,000.

The challenge comes from the fact that banks are not obliged to report to SKAT if they are located abroad. This means that even if you take out a loan online on a ".dk" domain, e.g. banknorwegian.dk, it is not certain that you will automatically get your deduction.

In this article we will go through:

  • What deductions for foreign loans are
  • Other conditions to be aware of
  • Whether you can get deductions yourself

What is the deduction for foreign loans?

There are 2 scenarios where you can get this deduction. One is if you have taken out a loan abroad. For example, you may have lived outside Denmark and have previously taken out some debt that you are still paying off. This is the 'easy' scenario to deal with.

The slightly more opaque scenario is if you take out a loan from what looks like a Danish branch, e.g. Bank Norwegian's Danish website. Here you need to be particularly careful because Bank Norwegian is actually based in Norway and is therefore not required by SKAT to report your interest paid on loans. Therefore, you have to do it yourself.

In both scenarios, you get a deduction for the interest you pay to the bank. Deductions for interest on bank loans, mortgages, etc. are some of the deductions most Danes use. So this can quickly add up to a lot of money that you miss out on every year.

Unfortunately, informing the tax authorities about the loans can be complicated. There is a whole separate section of the tax return that you need to use for this. Especially if it is a real estate loan, for example if you have bought a house or apartment in the south. In addition, there are also several things to be aware of, as explained below.

What else should you be aware of?

There are several other elements to be aware of with this deduction:

  • You have to be sure that you fall into one of the 2 scenarios above, i.e. that your bank has not reported the deduction in advance
  • Then you must be 'fully taxable' in Denmark. This means that you do not pay tax in other countries
  • In addition, the interest must be paid during the year, otherwise you will not get the deduction until it is paid

See if you can get a tax refund in just 15 minutes.

In TaxHelper, we help you find the deductions you're entitled to. You answer a few simple questions that take just 15 minutes to complete.

Then we report the deductions, and you get an extra DKK 2,704 back in tax. At the same time, you only pay if you get a tax saving.

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