Denmark Renewable Energy Tax Guide

Wind Turbine Taxation

Income classification: Income from operating a wind turbine can be classified as: business income (virksomhedsindkomst) if the turbine is owned and operated as a business (the normal case for commercial wind farms), capital income (kapitalindkomst) if the turbine is a passive investment (e.g., a small turbine on farmland owned by the farmer but operated by a third party), or agricultural income if the turbine is integrated into a farming operation and the farmer materially participates in the operation. The classification determines the tax rate: business income is taxed at 22% (corporate) or progressive personal rates (up to ~52.06%), while capital income is taxed at up to 42% (lower if under ~55,000 DKK). Most turbine investors use a limited partnership (K/S — kommanditselskab) or a limited company (ApS/A/S) for wind investments — this ensures business income treatment at the 22% corporate rate.

Depreciation: Wind turbines are depreciable as machinery and equipment under the saldoafskrivningsordning (declining balance method) at a rate of 25% per year. This applies to the turbine itself (the tower, nacelle, blades, and transformer). The foundation and grid connection may be depreciated at a lower rate if classified as buildings/installations (typically 5–10% declining balance). For offshore wind, the depreciation is also 25% declining balance on the turbine assets, with higher rates for specific components if the useful life is shorter. Accelerated depreciation is available for certain green investments under the midlertidig forhøjet afskrivning rules (see investment incentives below).

Decommissioning provision: Wind turbine operators must recognise a decommissioning provision (nedtagningsforpligtelse) on their balance sheet for the future cost of dismantling the turbine and restoring the site. The provision is not deductible when recognised (it is a non-cash provision). The actual decommissioning costs are deductible when incurred. This means the tax deduction for decommissioning occurs years after the provision is recognised — a common tax planning point for wind farm investors. The provision must be calculated in accordance with Danish GAAP (Årsregnskabsloven) and the applicable IFRS if the company reports under IFRS.

Land lease payments: Payments to landowners for turbine placement (land lease — forpagtningsafgift) are deductible as a business expense. The landowner receives the lease payment as capital income (kapitalindkomst) — taxed at up to 42%. If the landowner is a farmer, the lease payment is taxed as agricultural income (business income). The distinction between capital income and agricultural income depends on whether the farmer materially participates in the turbine operation. Most farmers lease land passively and receive capital income.

Solar PV Taxation

Residential solar (private): Small solar installations on private homes (under ~50 kWp, typical for single-family homes) are subject to simplified tax rules. The electricity produced and used in the home is not taxable (no imputed income). If you sell excess electricity back to the grid (at the spot price or a feed-in tariff), the income is generally tax-free for small installations (under ~10 kWp). For larger private installations (10–50 kWp), the income from excess electricity sales is taxable as capital income (kapitalindkomst). The cost of the installation is not deductible (it is a capital improvement to the home). For more on property tax on solar installations, see our Property Tax Guide →.

Commercial solar: Solar installations on commercial buildings (warehouses, factories, office buildings) are treated as business assets. The installation cost is capitalised and depreciated at 25% declining balance (machinery and equipment). The income from selling electricity (via PPA or feed-in tariff) is taxable as business income. The electricity used by the business (self-consumption) reduces the business's electricity purchase costs — this is a non-taxable benefit (no imputed income for self-consumption). If the solar installation is on a leased building (e.g., rooftop solar paid for by the tenant), the tenant can depreciate the installation if they own it, or claim the lease payments as a deductible expense if they lease it.

Solar parks (ground-mounted): Ground-mounted solar parks (over 50 kWp) are treated as commercial energy production. The park is depreciable at 25% declining balance. Income from PPAs, feed-in tariffs, and green certificates (see below) is fully taxable as business income. Ground-mounted solar parks on agricultural land may interact with agricultural tax rules (the land remains agricultural for property tax purposes unless reclassified). For more on agricultural rules, see our Agriculture and Farming Guide →.

Biogas and Power-to-X

Biogas plants: Biogas production (from agricultural waste, manure, organic waste) receives specific tax incentives under Danish law. The biogas support scheme provides a premium tariff (tillæg) on top of the market price for biogas injected into the natural gas grid. The premium is taxable as ordinary business income. The biogas plant is depreciable at 25% declining balance. Upgrading biogas to biomethane (grid injection quality) qualifies for the same treatment. The CO₂ tax exemption for biogas (biogas is exempt from the CO₂ tax on fossil fuels) is a significant financial benefit — see our Green Business Tax Guide → for details on CO₂ tax rates and exemptions.

Power-to-X (PtX): Power-to-X (hydrogen, e-fuels, ammonia produced from renewable electricity) is an emerging sector in Denmark. The Danish government has announced a PtX support scheme (2024–2030) that provides a fixed premium per kWh of electrolysis capacity. The premium is taxable as business income. PtX plants are depreciable at 25% declining balance for the electrolysis equipment and associated machinery. Buildings (electrolysis halls, storage facilities) are depreciated at a lower rate (typically 5–10% declining balance). The electricity used for PtX is subject to the reduced electricity tax (elafgift) rate for energy-intensive industries — approximately 0.01 DKK/kWh (versus ~0.80 DKK/kWh for households). The CO₂ tax on PtX inputs also benefits from reduced rates. The PtX sector is subject to evolving tax rules — specific advice is recommended.

Green Certificates and PPAs

Green certificates (certifikater): Denmark uses the EU Guarantees of Origin (GO) system for renewable energy certification. Producers of renewable electricity receive GOs for each MWh produced. GOs prove that the electricity was generated from renewable sources. They can be sold separately from the physical electricity — typically to energy suppliers, corporations, and utilities that need to demonstrate renewable energy usage. The sale of GOs is taxable income for the producer — the proceeds are taxed as business income (or capital income for private producers). The cost of purchasing GOs (for an energy supplier that buys them to certify their supply) is deductible as a business expense. The trading of GOs does not attract VAT (it is a VAT-exempt financial instrument for most transactions, but the treatment depends on how the trade is structured — spot trading vs bilateral contracts). For more on VAT treatment, see our VAT Registration Guide →.

Power Purchase Agreements (PPAs): A PPA is a long-term contract between a renewable energy producer and a buyer (corporate off-taker or utility). For the producer, PPA income is taxable as business income. For the off-taker, PPA payments for electricity are deductible as an energy cost. The PPA may include green certificate delivery — if the certificates are bundled with the electricity (a "green PPA"), the full contract price is deductible/ taxable as a single energy cost. If unbundled (separate contracts for electricity and certificates), the certificate component is treated as a separate revenue/ cost stream. VAT on PPAs: The supply of electricity under a PPA is subject to 25% VAT (reduced to 0% for cross-border supplies to VAT-registered businesses in other EU countries under the reverse charge mechanism). PPAs between Danish entities: the producer charges 25% VAT, which the off-taker can deduct (if VAT-registered). For cross-border PPAs (Danish producer selling to a non-Danish off-taker), the place of supply is the off-taker's country — no Danish VAT is charged, and the off-taker accounts for reverse charge VAT in their country.

Investment Incentives

Accelerated depreciation (midlertidig forhøjet afskrivning): As part of Denmark's green transition, a temporary accelerated depreciation scheme applies to certain green investments (2024–2027). Under the scheme, renewable energy investments (wind, solar, biogas, PtX) qualify for a 120% deduction (the investment cost is deducted at 120% of the actual cost). The cap is approximately 50 million DKK per company per year. The scheme is subject to EU state aid approval — check current status on skat.dk. For more on investment deductions, see our Business Expenses and Deductions Guide →.

R&D credits for green tech: The enhanced R&D super-deduction (108–120%, see our R&D Tax Credits Guide →) applies to R&D activities in renewable energy — new turbine blade designs, solar cell efficiency, biogas upgrading technology, PtX electrolysis, and carbon capture (CCS/CCU). Companies developing new renewable energy technology can combine the super-deduction with the accelerated depreciation scheme for qualifying capital investments — the R&D deduction applies to the development costs, and the accelerated depreciation applies to the capital assets.

Energy Communities

Vedvarende energifællesskaber (VEF): Denmark has implemented the EU Renewable Energy Directive's provisions on renewable energy communities (fællesskaber for vedvarende energi). An energy community is a legal entity (typically a cooperative — andelsforening or a limited company) owned by local members (citizens, SMEs, local authorities) that invests in and operates renewable energy installations. The income from the energy community's electricity sales is taxable at the entity level. However, members can benefit from the electricity tax exemption for electricity produced and consumed locally (within the community). The members' share of electricity is not taxable income for the member (no imputed benefit). If the energy community distributes profits to members, the distributions are taxable as dividends (27%/42% for individuals) or capital income (if structured as an andelsforening with reduced taxation). The taxation of energy communities is still evolving — specific advice is recommended for the structuring.

Related Guides

• Green Business Tax Guide → — CO₂ tax, energiafgift, emissionsafgift, green tax reform
• Business Tax Return Guide → — corporate tax, depreciation, filing
• R&D Tax Credits Guide → — super-deduction, cash payout for green R&D
• Property Tax Guide → — property tax on renewable installations
• Agriculture and Farming Guide → — agricultural biogas, solar on farmland
• Business Expenses and Deductions Guide → — accelerated depreciation, investment deductions
• Company Forms Guide → — ApS, K/S, andelsforening structures
• Excise Duties Guide → — energy excise duties, electricity tax