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Denmark Agriculture & Farming Tax Guide

Danish agricultural taxation operates under special rules distinguishing between full-time commercial farming (erhvervsmæssigt landbrug) and part-time/hobby farming. Livestock inventories are taxed under a unique rolling-average valuation system, farm subsidies are generally taxable, and energy/CO₂ tax refunds have special treatment for agriculture. The 2024 Green Tripartite Agreement introduces the world's first agricultural CO₂ tax. For fisheries and aquaculture (dambrug, havbrug) — which share many agricultural tax principles — see our Fisheries and Aquaculture Tax Guide →.

Commercial vs Non-Commercial Farming

Danish tax law distinguishes between full-time commercial farming (erhvervsmæssig virksomhed) and part-time/hobby farming. The classification determines loss deductibility and VSO eligibility.

  • Two conditions for commercial classification (C.C.1.3.2.1):
    • Technically sound operation: The farm must be managed according to standard agricultural practices (teknisk-landbrugsfaglig forsvarlig drift).
    • Profit expectation: There must be a reasonable expectation of achieving at least break-even (before interest and depreciation) over the long term. Direct EU subsidy payments are included in this assessment.
  • Part-time farming: Even if conditions are met, loss deductions may be denied if turnover is very limited. The taxpayer must demonstrate genuine business intent.
  • Loss deductibility: Losses from non-commercial (hobby) farming are not deductible against other income. Losses from commercial farming are fully deductible.
  • VSO eligibility: Only commercial farming activities qualify for the Virksomhedsordning (VSO).

Livestock Inventory Taxation

Agricultural businesses use a special rolling-average valuation system for livestock (husdyrbesætninger):

  • Valuation method: Livestock is valued at the average cost of the herd, adjusted annually by adding purchases and subtracting sales at average prices.
  • Mandatory categories: Different animal types (cattle, pigs, sheep, poultry) are valued separately. Standard unit values are published annually by SKAT.
  • Tax treatment of disposals: Gains or losses on livestock disposals are included in ordinary business income. The rolling-average system smoothes out year-to-year fluctuations.
  • Own consumption: Farmers are taxed on the value of products taken for personal use (meat, milk, eggs, poultry) at SKAT's published minimum rates (2026: beef 22 kr/kg, pork 8.50 kr/kg, lamb 26 kr/kg, poultry/eggs 255 kr/person/year, milk 171 kr/person/year).

Farm Subsidies and Grants

Most agricultural subsidies and grants are taxable as business income (SL §4):

  • Direct EU subsidies: Single Payment Scheme, greening payments, and area-based payments are taxable in the year the entitlement is confirmed (typically the year of the subsidy decision, not necessarily the payment year).
  • National subsidies: Environmental grants, afforestation support, and rural development payments are generally taxable.
  • Conditional subsidies: If a subsidy is subject to conditions that must be fulfilled before the farmer has an unconditional right, taxation is deferred until the conditions are met.
  • Capital grants: Grants for capital investments (buildings, machinery) may be treated as a reduction of the asset's cost basis rather than as immediate income.
  • Young farmer establishment support: Lump-sum grants to young farmers (e.g., 191,635 kr) are taxable in the year the final right to the grant is established (SKM2025 binding answer).

Energy and CO₂ Tax Refunds for Agriculture

Agricultural businesses (landbrug, gartneri, skovbrug, fiskeri, dambrug, pelsdyravl) benefit from specific energy tax rules:

  • Process energy refund: As of 2025, the general refund rules apply (the separate agricultural refund rules were repealed by Law 329/2023). Non-quota agricultural businesses receive 100% energy tax refund on process consumption.
  • Greenhouse growers (væksthusgartnere): May qualify for enhanced energy tax refunds for process energy used in greenhouse heating (subject to EU state aid rules).
  • CO₂ tax refund: Agricultural businesses follow the standard declining scale (42.67% in 2026, declining to 0% in 2030).
  • Fishing exemption: Fishing industry is exempt from CO₂ tax until 2029 under the Green Tax Reform.

For more on energy tax rates and refunds, see our Green Business Tax Guide →.

Agricultural CO₂ Tax (Green Tripartite Agreement 2024)

Denmark made history in 2024 by becoming the first country to introduce a carbon tax on agricultural emissions. Key features relevant to farmers:

  • Scope: Non-energy CO₂e emissions from livestock (enteric fermentation, manure management) and agricultural soils.
  • Low initial rate: The tax starts at a low level with large deductions for existing abatement technologies.
  • Deductions: Farmers who document use of approved abatement technologies (e.g., slurry acidification, biogas upgrading) can significantly reduce their effective tax rate.
  • Phase-in: Gradual implementation with review points in 2026, 2028, and 2030. Technology development will inform rate adjustments.
  • Impact: Most farms are expected to face minimal additional costs in the initial years due to the deduction structure.

Forestry Taxation (Skovbrug)

  • Commercial forestry: Taxed under the standard agricultural principles. Afforestation grants and climate forest subsidies (klimaskov) are taxable. Carbon credit sales may be taxable depending on the structure.
  • Climate forest subsidy: 80% of the subsidy is paid upfront, 20% after 2-3 years following inspection (SKM2025.174.SR). The first instalment is taxable upon grant commitment.
  • New planting: Costs of establishing new forest (fredskov, juletræer, energiafgrøder) may be deductible or capitalised depending on the nature of the planting.
  • Property classification: Forest properties are subject to special valuation rules under the new property assessment system (Ejendomsvurderingsloven). A transition arrangement allows owners of properties that change category to retain the old classification.

Flat-Rate VAT Scheme for Farmers

Agricultural businesses can use a simplified VAT flat-rate scheme (landbrugsordningen):

  • Output VAT at flat rate: Approximately 12% on agricultural sales (instead of standard 25%), with correspondingly limited input VAT deduction.
  • Eligibility: Farmers, horticulturists, and certain agricultural businesses with primarily agricultural output.
  • Effect: Simplifies VAT accounting. The flat rate compensates for the inability to deduct all input VAT.
  • Opt-out: Farmers can choose to use the standard VAT system (25% rate, full input VAT deduction) instead, which may be beneficial for capital-intensive operations.

For more on VAT schemes, see our VAT Registration Guide →.

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