Denmark Gaming and Software Development Tax Guide

Capitalisation of Development Costs

Danish GAAP vs Tax: Under Danish GAAP (Årsregnskabsloven), development costs for software and games must be capitalised if certain criteria are met: (a) the product is clearly defined and technically feasible, (b) the company intends to complete the product and use/sell it, (c) the company has sufficient resources to complete development, (d) the product will generate future economic benefits, and (e) the development costs can be reliably measured. If these criteria are met, development costs must be capitalised as an intangible asset on the balance sheet and depreciated over the expected useful life (typically 3–5 years for a game title, 5–10 years for a reusable game engine). If the criteria are not met, the costs must be expensed immediately as incurred.

Tax treatment: For tax purposes, capitalised development costs are depreciable under the saldoafskrivningsordning (declining balance) at 25% per year (as intangible assets). Alternatively, the company can elect to expense the costs immediately for tax purposes (even if capitalised for accounting purposes) if the development does not qualify as R&D under the super-deduction rules (see below). However, the safe approach is to follow the accounting treatment for tax purposes unless there is a specific reason to diverge. If the development qualifies as R&D (see next section), the costs can be both expensed immediately AND receive the super-deduction — this is the best outcome.

Games as intangible assets: A completed game title is an intangible asset for tax purposes. The cost of development is capitalised and depreciated over the game's economic life (typically 3–5 years for a mobile game, 5–7 years for a AAA title). The depreciation starts when the game is released (completed for sale). If the game is subsequently updated with major expansions or content packs, the additional development costs may be capitalised as separate assets or added to the existing asset (depending on the nature of the update). Ongoing operational costs (server hosting, customer support, matchmaking services) are expensed immediately as incurred — they are not development costs.

R&D Super-Deduction for Gaming

Qualifying R&D: Game and software development can qualify as R&D (forsknings- og udviklingsaktiviteter) for the enhanced super-deduction (108% in 2025, ramping to 120% by 2028) if the activity meets the Frascati criteria: novelty, creativity, uncertainty, systematic approach, and transferability. Game development activities that typically qualify: development of new game engines or significant engine modifications (rendering, physics, AI), development of new procedural generation algorithms, development of new networking and multiplayer architectures, development of new animation or rigging systems, and development of new tools for content creation (if the tools are novel and not commercially available). Activities that do NOT typically qualify: routine game level design, creating game art and assets (unless the technique is novel), quality assurance testing (routine), localisation and translation, and bug fixing and maintenance. The distinction between qualifying R&D and routine development is the most commonly audited area — maintain detailed project documentation for each development activity.

Cash payout for loss-making studios: If your gaming studio is in the development phase (pre-revenue) and has tax losses, you can claim the cash payout (skattekredit) on the R&D super-deduction. The maximum deductible basis is 25 million DKK per year (35 million DKK from 2027), giving a maximum cash payout of approximately 440,000 DKK–660,000 DKK per year depending on the super-deduction rate. This cash is paid directly by SKAT — it is NOT a loan and does NOT need to be repaid. For game studios in the 2–4 year development cycle, the cash payout can provide meaningful liquidity during the development phase. For more details on the super-deduction rates and the cash payout rules, see our R&D Tax Credits Guide →.

VAT on Digital Games, Microtransactions, and In-App Purchases

Standard rate of 25%: Digital games, downloadable content (DLC), microtransactions (virtual currency, skins, cosmetic items), in-app purchases, subscriptions to online games, and loot boxes are all subject to 25% Danish VAT when sold to Danish consumers (B2C). The VAT is calculated on the price paid by the consumer — you do not deduct the cost of the virtual item (it has no cost basis). The place of supply for B2C digital services is the customer's country of residence (determined by two non-contradictory pieces of evidence: billing address, IP address, bank location, SIM card country code). If you sell to consumers in other EU countries, you charge their local VAT rate and report via the One Stop Shop (OSS) scheme. For sales to consumers outside the EU, no EU VAT applies (but you may have VAT obligations in the customer's country).

Loot boxes and gambling classification: The VAT treatment of loot boxes depends on the gambling classification. If a loot box is classified as gambling (because the content is random and has real-world monetary value), the VAT treatment follows gambling rules — VAT-exempt (no VAT charged on the sale of the loot box). If classified as a digital purchase (random content but no real-world tradeable value), the standard 25% VAT applies. The Danish Gambling Authority (Spillemyndigheden) has taken a restrictive view — many loot boxes in major games (FIFA Ultimate Team, CS:GO cases) are considered gambling under Danish law (this is an evolving area). If your game includes loot boxes that could be classified as gambling, seek specific advice on both VAT and gaming licensing. For more on gambling tax, see our Gambling and Gaming Tax Guide →.

Digital platforms (App Store, Steam, Google Play): If you sell games through a digital platform (App Store, Steam, Google Play, Epic Games Store), the platform may act as the deemed seller for VAT purposes under the platform economy rules (the deemed supplier rule applies to non-EU platforms selling to EU consumers). For EU-based platforms (Apple (Ireland), Google (Ireland), Valve (Switzerland/US — different treatment)), the platform typically handles VAT collection and remittance on B2C sales. Check your platform agreement to understand whether the platform or you are responsible for VAT. Steam, for example, may apply reverse charge for B2B sales to developers but charge VAT on B2C sales. For more on platform VAT, see our Digital Platform Business Guide →.

IP Holding and Royalty Withholding Tax

IP holding structure: If your gaming studio creates valuable IP (game titles, characters, trademarks, technology), you may transfer the IP to a separate IP holding company that licenses the IP back to the operating studio or to international publishers. The IP holding company receives royalty income from the licence fees, taxed at 22% (corporate tax). The operating studio deducts the royalty payments as a business expense. This structure is common in the gaming industry and is recognised by SKAT if the IP holding company has substance (employees, office, active management of the IP). Without substance, SKAT will recharacterise the arrangement as a direct ownership of the IP by the operating studio (the substance-over-form doctrine). For a detailed analysis of IP taxation, transfer pricing, and DEMPE functions, see our IP and Royalty Tax Guide →.

Royalty withholding tax (WHT): If your Danish gaming studio pays royalties to a foreign IP owner (e.g., a foreign parent company that owns the game IP, or a foreign licensor of a game engine), the royalty payment is subject to Danish withholding tax at 22%, unless a reduced rate applies under the applicable tax treaty or under the EU Interest & Royalty Directive (if the recipient is an associated EU company). The reduced treaty rate is typically 0–15% depending on the country. To claim the reduced rate, the Danish studio must obtain a certificate of residence from the foreign recipient's tax authority and a beneficial ownership declaration. Without a valid certificate, the full 22% WHT applies. For more on WHT rules and treaty rates, see our Tax Treaties Guide →.

Employee Share Schemes for Gaming Startups

Section 7P scheme: Gaming startups can attract talent by offering employee shares (medarbejderaktier) under the section 7P scheme. Under this scheme, employees can receive shares or warrants at a discount of up to 15% of the market value without immediate taxation. The employee is taxed at the time of sale (at the share income rate of 27%/42%) — not at the time of grant. The annual limit per employee is approximately 10% of the employee's annual salary (or ~100,000 DKK, whichever is lower). Gaming startups that expect significant valuation growth (typical in the industry) use this scheme to provide equity incentives that align employee and founder interests. For more details, see our Employee Shares Guide →.

Related Guides

• R&D Tax Credits Guide → — super-deduction rates, cash payout, qualifying activities
• IP and Royalty Tax Guide → — IP holding, royalty WHT, transfer pricing for IP
• E-Commerce VAT Guide → — OSS, IOSS, digital services VAT, platform rules
• Business Expenses and Deductions Guide → — capitalisation, depreciation, R&D deductions
• Employee Shares Guide → — 7P scheme, warrants, employee equity
• Digital Platform Business Guide → — platform VAT, DAC7 for app stores
• Gambling and Gaming Tax Guide → — loot boxes, gambling classification
• Business Tax Return Guide → — corporate tax return, selvangivelse