Comparing charitable tax deductions in Denmark, Finland, Sweden, Norway, and Iceland

In the landscape of charitable giving, the Nordic nations—Denmark, Finland, Sweden, Norway, and Iceland— share many aspects but still have their own special approach to fundraising and philanthropy. Each of these countries, while sharing a common way to do tax deductions, has also developed distinct frameworks that reflect their unique societal values and priorities in philanthropy.

As BetterNow have always made an effort of supporting these tax deduction schemes in the possible way through custom reports and securely collecting and storing social security numbers, this article ca  draw on our research for this and we thought we wanted to share it with the wider world.

In this comparison in this blog post we will highlight the contrasts and commonalities in their tax deduction systems. While all these countries emphasise a streamlined and efficient process for both donors and charities, they diverge in specific rules, limits on deductions, and eligibility criteria for charitable organisations. 

Our exploration will not only compare these Nordic schemes amongst themselves but will also briefly contrast them with the more familiar systems in the UK and the US. 

The nordic approach

In the Nordic countries — Denmark, Finland, Sweden, Norway, and Iceland — the approach to tax deductions for charitable gifts is somewhat different from what many international readers might be familiar with, especially those from the UK or the US. 

Under the Nordic model, when an individual or corporation makes a charitable donation, it's often the responsibility of the charity, not the donor, to report this donation to the tax authorities. This system significantly reduces the administrative burden on the donor and ensures a more streamlined process with less potentiale for fraud. The donor usually needs to provide their personal identification number at the time of donation, enabling the charity to report the donation correctly.

Tax deduction limits and eligibility

Each Nordic country has specific rules regarding the maximum amount that can be deducted and the types of charities that are eligible for these deductions. The criteria for eligible charities typically include being registered and recognized by the respective country's tax authorities, and meeting certain operational and financial standards. We will go each of the nordic countries schemes in detail in the below.

Comparing with the uk and us systems

It's worth briefly comparing this approach with the systems in the UK and the US. In the UK, the Gift Aid scheme allows charities to reclaim tax on a donation made by a UK taxpayer, effectively increasing the value of the donation. The donor must give their consent for the charity to do this, but doesn't need to take any further action for tax purposes.

In the US, the process is more donor-driven. Taxpayers who make charitable donations can claim a deduction on their income tax returns. They must keep records of their donations and report them when filing their taxes. It is the donors responsibility to report the deductions and prove it if neccessary.

Specifics of the nordic tax deduction schemes.

We will now go through each of the nordic countries and the compare them. All limits and amounts are the most recent we could find - most often for the year 2023.

In addition to the below it is important to note that companies can deduct donations to charities with the full amount as long as they can argue it is a marketing expense. Therefore the limitations on tax deductibility for companies is only relevant as long as it doesn’t count as marketing expenses.

Denmark

Denmark also have special rules around tax deductions for contractual given giving over a period of time, these are much more complicated and used so little as of little consequence,

Specific rules for tax deductions:

In Denmark, individuals and companies can deduct charitable donations from their taxable income. The deduction is available for contributions to approved charities and certain non-profit organizations. The donation can also be made in kind (like goods or services), as long as the value ascribed to it can be documented.

Limits on deductions:

For individuals and companies, the maximum annual total deductible amount for all charitable donations is DKK 17,300 (as of 2023). It is the full amount of the donations that is eligible for a deduction. This limit is adjusted annually. 

Charity eligibility and qualification:

Charities need to be officially approved by the Danish tax authorities (SKAT) to be eligible for receiving tax-deductible donations. The approval process involves meeting specific criteria, such as having a purpose that benefits the public, being non-profit, and having transparent financial operations.

There are some additional minimum criteria:

• Charities must not undermine democracy or human rights. 
• Beneficiaries must not be limited to a population under 35,000 (there are special rules for organisations working with rare diseases)
• Annual donors in the EU/EØS must exceed 100 (of at least 200 kr).
• Charities must report gifts over 20,000 DKK from foreign donors. 
• Minimum annual gross income or capital for charities is 150,000 DKK. 
• Additional criteria for associations and foundations include governance stipulations and membership rules.

It is the charity that is responsible for reporting the donation to the tax authorities. Individuals can not report it themselves. Then charities do this by collecting the social security numbers of the donors and sending in the donation amount attached to the social security number once a year.

Sources and more information: Skat (1) and Retsinformation (2)

Finland

Specific rules for tax deductions:

Individuals and estates can deduct monetary donations of at least 850 euros and up to 500,000 euros made for the promotion of science or art. The recipient must be a publicly funded university, college, or related fund within the European Economic Area.

Limits on deductions:

Donations below 850 euros or over 500,000 euros to a single recipient in a tax year are not deductible. This is per recipient. The maximum is thus in reality way higher as you could donate to several universities each year.

Charity eligibility and qualification:

Approved recipients include publicly funded Finnish universities, colleges, and university funds. The deduction applies only to monetary donations. There are no formula approval process - nor seems it to be needed.

Just like in the other nordic countries it is not the donor but the beneficiary that will report the donation. 

Sources and more information: Vero

‍Iceland

Specific rules for tax deductions:

Donations by companies and individuals to certain institutions and organizations qualify for tax deductions.

Limits on deductions:

The minimum deductible amount is 100,000 ISK, with a maximum deduction of total income or up to 350,000 ISK. Companies can maximum deduct up to 1.5% of their revenue as charity donations.

Charity eligibility and qualification:

To qualify, the recipient must be listed in the Directorate of Internal Revenue's approved list, which includes humanitarian, cultural, educational, and scientific organisations. To get listed you need to meet the following criteria:

• The entity should be non-profit, primarily volunteer-driven, and have a societal or community purpose.
• Activities should extend beyond local scope, with national reach.
• The entity's purpose, use of funds for public benefit, and asset management upon dissolution should be clearly defined in its bylaws.
• Donations must be used promptly for the intended purposes without significant year-to-year accumulation.

Sources and more information: Skatturinn (1), (2)

Norway

Specific rules for tax deductions:

Donations of at least 500 NOK to approved charitable organizations qualify for tax deductions. 

Limits on deductions:

The maximum deduction is 25,000 NOK per year, this havs recently ben lowered cinsiderablt from 50,000 NOK (2021).

Charity eligibility and qualification:

Charities must be approved by the Norwegian Tax Administration. This includes Norwegian and EØS-based organizations. Approval requires that the charity is registered, complies with Norwegian laws, and operates for public benefit. In addition it must be operating nationally and not just be a regional charitable organisation. And at last, if it is a foundation, it must be receiving public grants.

It is the charity that will report the donation to the the tax authorities. But the donor also needs to keep documentation themselves. If the amount is larger than 10.000 the donation has to have been made as a bank transfer.

Sources and more information: Skatteetaten (1), (2)

Sweden

‍Specific rules for tax deductions:

Donors can receive a tax deduction for monetary donations to approved charities supporting social welfare or scientific research. Only donations larger than 200 SEK qualifies.

Limits on deductions:

The tax deduction is 25% of the donation amount with a maximum donation deduction of 3.000 SEK corresponding to 12.000 in donations. If the donor gives less than 2.000 SEK in donations a year no deduction is given. 

Charity eligibility and qualification:

Charities must be non-profit and support social welfare or scientific research. They must have an authorized or approved auditor, show transparency in gift handling, and meet specific legal requirements for being considered public benefit entities. These include:

• The organisation must primarily serve the public interest.
• It should not distribute profits to members or owners.
• The organisation must have an open membership or be accessible to a wide public.
• Activities should be conducted democratically and transparently.
• The organisation should not have political or religious purposes as its main focus.

It is the charity that is responsible for reporting the donation to the tax authorities. Individuals can not report it themselves. Charities is obliged to report it they have all the information to do so, and the donor can’t object to this.

Sources and more information: Skatteverket (1), (2)   

Comparison

We have summarised the five countries scheme in the below table.

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When we compare the the five countries, some conclusions stick out to us:

Similar eligibility criteria in Iceland, Sweden, Norway, and Denmark.

Iceland, Sweden, Norway, and Denmark share similar criteria regarding the eligibility of organizations for tax-deductible donations. In these countries, the emphasis is largely on ensuring that charities contribute to public welfare and align with national values, such as supporting democracy, human rights, social welfare, or scientific research. This alignment suggests a collective Nordic approach that prioritizes societal benefit and ethical considerations in defining eligible organisations for tax incentives.

When taking into account the population size, then Norway and Iceland have similar number of eligible organisations. Denmark is the country with most eligble charities, reflecting that there is no requirement to be a national organisation. The Swedish number is much lower though. This could be explained  by the  scheme being quite new,  or it could be due to it being less attractive due to its complexity and limits on deductibility.

Divergence in deductibility limits:

When it comes to the limits on deductibility, Iceland, Norway, and Denmark exhibit a similar range, with Denmark allowing deductions up to approximately 2,318 EUR, Norway up to 2,500 EUR, and Iceland ranging between 70 and 2,450 EUR. Sweden, however, stands out with significantly lower limits — up to around 143 EUR in 2021 and 285 EUR in 2022 — and the unique feature of allowing only 25% of the donation to be deductible. This distinct approach in Sweden indicates a more conservative stance towards the tax benefits of charitable giving, potentially influencing the scale and nature of donations within the country.

Finland's unique scheme:

Finland distinguishes itself in two major ways. Firstly, it sets a very high limit on the amount that can be deducted, ranging from 850 EUR to an impressive 500,000 EUR, but also imposes a high minimum amount for eligibility. Secondly, Finland's eligibility criteria are narrowly focused, with only publicly funded universities and similar educational institutions qualifying for the scheme. This approach underscores Finland's specific commitment to supporting education and research through philanthropy, differing significantly from its Nordic neighbours in both the scope and scale of tax-deductible donations.

The effect of minimum amounts

Norway and Sweden both have minimum amounts for which contributions are eligible. Finland has minimum amounts for contributions to a single beneficiary for eligibility, while Iceland and Sweden require a minimum amount for the total charitable contribution for the whole year. Denmark, on the other hand, does not have any minimum amounts. It would be incredibly interesting to see a scientific study of the impact of these varying minimum requirements.

Complexity and storytelling

The contrast between Denmark and Sweden's schemes is particularly noticeable. While both countries have comparable eligibility criteria and general designs, the limits in place in Sweden make it incredibly complex and entail so many constraints that communication becomes challenging. Conversely, the Danish system is the simplest for the donor and enables organisations to convey a clear narrative: all donations are eligible for full tax deductibility up to the maximum amount.

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We hope this exploration of the charitable tax deduction systems in the Nordic countries has been insightful and useful. By delving into the specific frameworks of Denmark, Finland, Sweden, Norway, and Iceland, we aimed to shed light on the varied approaches these nations take towards philanthropy and tax incentives. 

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