TilskudTjek
What are tax deductions — and why do most companies miss them?
Tax deductions are the second of three financial value layers covered by TilskudTjek. While grants are money you apply for and receive from external sources, tax deductions are money you have already spent — which you can potentially deduct from your tax at an enhanced rate, or even receive as a cash payout.
The difference is fundamental:
| Grants | Tax deductions | |
|---|---|---|
| Source | Public pool (Innovation Fund, etc.) | Your own tax (Tax Agency) |
| Mechanism | Apply, evaluation, potential payout | Document costs → enhanced deduction or payout |
| Competition | Yes — you compete against other applicants | No — if you qualify, you qualify |
| Timing | Application windows and deadlines | At annual accounts / tax return |
| Who evaluates | Fund's evaluation panel | Your accountant + potential Tax Agency audit |
Most companies focus exclusively on grants because they are visible: there is a fund, a program, an application portal. Tax deductions are invisible — they require your accountant to actively search for them in your expenses. And many accountants only do so if you ask.
The core scheme is the R&D deduction (Tax Act § 8 B), providing an enhanced deduction for qualified R&D costs. For loss-making companies (typically startups), the tax credit (Tax Act § 8 X) allows for the tax value to be paid out in cash.
Overview: All tax deduction schemes
Here are the key tax deduction schemes for Danish businesses. The two main ones are the R&D deduction and the tax credit — others are briefly summarized.
| Scheme | What it provides | Who it's for | Accountant role |
|---|---|---|---|
| 108-120% deduction | Profitable companies with R&D | Evaluates and includes in tax return | |
| 22% cash payout | Loss-making companies (startups) | Evaluates and applies | |
| Immediate depreciation | Full deduction in year of purchase | Companies with minor asset purchases | Standard accounting practice |
| Entrepreneur deduction | Deduction for startup investors | Private investors in SMEs | Accountant guides investor |
Does your company have R&D costs you've never claimed deductions for?
Our free CVR scan identifies if R&D deduction and tax credit may be relevant for you. The report includes a specific checklist for your accountant.
Start free scan →FoU-fradrag (Ligningslovens § 8 B)
Enhanced deduction for research and development costs
Deduct your qualified R&D costs at more than 100% — the extra portion is direct tax savings.
What is it?
Section 8 B of the Tax Act allows companies to deduct qualified R&D expenses at an enhanced rate. The current rate is 108-120% (exact rates vary by year — your accountant knows the current one).
This means you can deduct more than you actually spent. The difference directly reduces your tax payment.
Which expenses typically qualify?
- Salary for R&D staff — hours spent specifically on R&D activities
- R&D materials and consumables — prototype materials, test equipment
- External subcontractors — R&D-specific consultants and specialists
- Depreciation of R&D equipment — equipment used for testing and research
Who is it relevant for?
The R&D deduction is potentially relevant for any profitable company spending money on developing something new. Typically relevant industries:
- Technology and software — but ONLY projects with real technical uncertainty
- Manufacturing and industry — new process development, materials research
- Life science and pharma — clinical research, new medicine, medical devices
- Energy and cleantech — new technology for renewable energy
- Engineering firms — construction research, new methods
Calculation example: R&D deduction at 110% rate (indicative)
Skattekredit (Ligningslovens § 8 X)
Cash payout of the tax value of your R&D costs
Even companies not yet paying tax can get money back — up to 22% of qualified R&D costs.
What is it?
The tax credit is the most underrated scheme for Danish startups and scale-ups. In short: if your company has a tax loss, you can receive 22% of your qualified R&D costs as a cash payout — instead of waiting to use the deduction in future profitable years.
Example: Tax credit for loss-making startup
R&D deduction vs. Tax credit — when to use what?
| R&D deduction (§ 8 B) | Tax credit (§ 8 X) | |
|---|---|---|
| Company situation | Profitable (pays tax) | Loss-making (no tax) |
| What you get | Enhanced deduction (108-120%) | Cash payout (22% of R&D) |
| Timing | Reduces tax same year | Paid cash after tax return |
| Cap | No cap on deduction itself | DKK 25M in R&D costs |
| Cost requirements | Identical — both require costs to qualify as research/experimentation under Section 8 B | |
⚠️ Software Trap — the most important section on this page
Most tech companies believe their software development automatically qualifies as R&D. Typically, it doesn't. The Tax Agency and Tax Appeals Board have rejected R&D deductions for software firms that deducted routine development costs in several rulings.
The issue is that many software projects use known technologies in new ways — which is typically not enough. "New to you" is not the same as "new to the industry."
What typically does NOT qualify vs. what can
✗ Typically does NOT qualify
- Development of new app/webshop with known tech
- Integration of existing systems (API, ERP, CRM)
- Customization of standard software to your needs
- Routine programming and bugfixes
- Combining known technologies in a new way
- Standard web development, dashboards, SEO tools
- Migration to new platform or cloud
✓ Can potentially qualify
- Development of new algorithms with technical uncertainty
- Fundamental research into new methods
- Materials research and process development
- Prototype testing with unknown outcome
- Projects creating new knowledge for the industry
- Machine learning / AI with real technical novelty
- Hardware development with technical risk
The key question
“Does the project create new technological knowledge and understanding, or does it simply apply existing knowledge in a new way?”
If the answer is the latter, it likely does not qualify. But that is your accountant's assessment — not ours.
What strengthens your case
- A grant from Innovation Fund Denmark: If you've received Innobooster or Grand Solutions support, this objectively supports your project's innovation height. The Tax Appeals Board gives this weight.
- Collaboration with research institutions: If a university or RTO is involved, it indicates real research activity.
- Patent applications: Applying for a patent on the result indicates novelty.
- Published research results: Peer-reviewed articles are strong documentation.
Interactive calculator — what could it potentially mean for you?
Enter your estimated R&D costs and see the indicative effect. The calculation is purely illustrative — final assessment is done by your accountant.
Indicative R&D Calculator
All numbers are indicative. Use the result as a starting point for dialogue with your accountant.
Indicative calculation
⚠️ This calculation is purely indicative and does not constitute tax advice. The actual deduction percentage varies by income year. Final calculation is performed by your accountant.
Scan your CVR — see if R&D deduction may be relevant →Documentation requirements — start NOW, not at year-end
To apply the R&D deduction (or tax credit), you must document continuously — not just when the annual accounts close. The Tax Agency has specifically rejected deductions where documentation was reconstructed retrospectively.
Start time tracking today
A simple spreadsheet: date, employee, project, hours. Can be Google Sheets. Crucially, it must be continuous, not reconstructed.
Write project description (1-2 pages)
Per R&D project: What is technically new? What is the technical uncertainty? Write it NOW, not in 6 months.
Talk to accountant about account structure
R&D costs must be identifiable separately in accounting. Your accountant can set up the right accounts — typically an hour's work.
Collect documentation continuously
Invoices from R&D subcontractors, potential grant letters from Innovation Fund, internal notes on technical decisions.
At year-end: hand over to accountant
Use our Accountant-Ready Handover (see below) to structure the hand-over.
Accountant Checklist — the most valuable part of the report
Accountants love structure. Instead of a loose email asking “can we deduct something?”, you give them a document answering the questions they'd ask anyway — in the order they need them.
Here is a preview. The full, tailored version is part of your personalized report.
Get the full accountant checklist — tailored to your company
The TilskudTjek report includes a complete Accountant-Ready Handover with your company info, Software Trap warning, and the exact questions to ask. Ready to print and hand over.
Combining with grants — double benefit?
R&D deduction and grants can potentially be combined for the same project — but with an important limitation.
Combination example: Innobooster + R&D deduction
Frequently asked questions about tax deductions
Yes. R&D deduction and grants are independent schemes. However, an Innovation Fund grant significantly strengthens your documentation.
Generally, you can request reopening of tax assessments for the last 3 ordinary income years. This requires having the necessary documentation — and it must have existed continuously, not reconstructed.
You must repay the saved tax (or refund the tax credit) plus interest. That's why documentation and accountant approval are critical — and why we warn about the Software Trap.
Yes, R&D deduction applies to all business forms. But the tax credit (§ 8 X) only applies to companies.
Not automatically. The Tax Agency applies strict control to software firms. Routine programming and integration of known systems typically do NOT qualify. Only projects with real technical uncertainty and new industry knowledge may potentially qualify.
Yes, grants are generally taxable income. But since the grant typically covers incurred expenses (which are deductible), the net effect is often neutral.
No. We identify opportunities based on public rules and CVR data. We structure the questions you should ask your accountant — no more, no less. Final assessment is always your accountant's responsibility.
The report provides structured preparation that makes accountant dialogue productive. Instead of asking “can we deduct something?”, you give the accountant a Handover document with project description, novelty, and expense statement.
Tax deductions are only one of three layers
Grants give you external funding. Tax deductions let you keep more of what you've earned. But there is a third layer: support schemes and rights — funds you already have access to and perhaps never activated.
Find out if R&D deduction and tax credit are relevant for you
Free CVR scan in 30 seconds. The report includes a complete R&D deduction checklist for your accountant — with Software Trap warning and the exact questions to ask.
Disclaimer: This page is prepared by TilskudTjek as general guidance on tax deduction schemes. It is not tax advice. Rates, caps, and rules change continuously in annual finance acts. All calculation examples are illustrative. Final assessment of whether your costs qualify under Section 8 B or 8 X should always be made by your accountant. TilskudTjek assumes no responsibility for tax consequences. Official source: skat.dk.