Understand Deductions

What is deduction for foreign loans

foreign loans

What are deductions for foreign loans?

The deduction for foreign loans is not often seen, but when it is available, then it concerns a lot of money in deductions. For example, a family had a loan from Bank Norwegian, where they had missed out on DKK 135,000 in deductions.

The challenge comes from the fact that banks are not obliged to report to SKAT, if they are operating from abroad. So even if you take out a loan online on a ".dk" domain, such as banknorwegian.dk, you may not automatically receive your deduction.

In this article, we will cover:
  • What deductions for foreign loans are
  • Other conditions you will need to be aware of
  • Whether you are eligible to receive any deductions

What are deductions 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 thus have previously taken up some debts that you are still paying off. This is the 'easy' scenario to relate to.

The slightly more vague scenario is if you have taken out a loan in what looks like a Danish branch, e.g. Bank Norwegian's Danish website. In this case, you must pay special attention because Bank Norwegian actually belongs in Norway and is therefore not subject to SKAT's requirements to report your interest paid on loans. That's why you have to do it yourself.

In both scenarios, you get deductions for the interest you pay to the bank. Deductions for interest on bank loans, mortgages, etc. are some of the deductions most often used by Danes. So it can quickly be a lot of money that you miss every year.

Unfortunately, it can be a complicated affair to inform SKAT about the loans. There is a completely separate section of the tax return you need to use for this. Especially if it's mortgages, e.g. if you've bought a house or apartment in the south. In addition, there are also several things you should be aware of as explained below.

What else do you need to 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 already
  • Then you have to be 'fully tax liable' in Denmark. In other words, you do not pay tax in other countries
  • In addition, the interest must be paid during the year, otherwise you will not receive the deduction until it has been paid

Check to see if you are eligible for any deductions

Deductions for foreign loans can quickly become worth quite a lot of money as shown above. At the same time, it can be difficult to report it to SKAT.

That's why we in Tax Helper have created an easy and intuitive platform where you can easily see if you can get the deduction and get all the way across the finish line of reporting your deduction to SKAT. It is free to try out, and you only pay if you get a tax refund.