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Tax

What taxes do you have to pay in Denmark?

Tax

There are a number of different tax schemes in Denmark, and you should investigate which one you are covered by when you find employment. These taxes pay for the Danish welfare system which you will also benefit from.

You will need to know whether you have to pay full or limited taxes in Denmark. In addition, you are advised to check whether you are covered by the special ‘25% scheme’ for foreign researchers and key employees. This scheme can be applied instead of paying standard income tax.

What must I pay tax on?

Danish income tax consists of national tax, municipal tax and a healthcare contribution. Due to a ‘tax ceiling’ you will never pay more than 59% of your total income on income tax. All tax payers must pay some level Danish income tax. The amount of income tax you pay depends on whether you have full or limited tax obligations.

The income tax paid by anyone with limited tax obligations only includes income generated within Denmark. On the other hand, if you have full tax obligations you must pay tax on any income generated in any country.

You will also be obliged to pay tax on pensions, share dividends, rental income and benefits in kind. Tax on interest income must only be paid by tax payers with full obligations.

Social security contributions in Denmark

This is an 8% contribution paid on wages and benefits which you must pay whether you have full or limited tax obligations.

Tax allowances in Denmark

All workers in Denmark over the age of 18 are granted a base personal allowance (DKK 41,000 in 2009). You can obtain additional allowances for pension scheme payments, interest expenses, travel costs between home and work, fees for trade union membership and any unemployment insurance fund.

The Danish tax card

All employees in Denmark must have an electronic tax card which states their personal allowance and how much tax should be deducted from their wages. All workers in Denmark must also have a NemKonto ‘Easy Account’, which is the common system used for payments into a citizen’s account.

If you are subject to limited tax obligations, you need to apply for your card from the tax centre’s international division with the following documents:

  • Proof of your date of birth
  • Photographic identification (e.g. Passport)
  • Contract of employment stating wages
  • Proof of any spouse living abroad, if applicable

If you are subject to full tax obligations and you enrol in the National Register of Persons, you should apply for your card from the tax centre’s domestic division. Otherwise you will need to go to the international division, taking along the documents mentioned above, as well as your bank information.

The tax authorities will send your card to your employer electronically. However, if your employer does not receive your card, they have to hold back 60% of your salary.

The 25% scheme for foreigners in Denmark

This is one of the key examples of how you can benefit from the Danish welfare system. If you are a key employee or researcher from abroad, you may be entitled to pay a much lower tax rate on your gross salary for the first three years of your stay in Denmark.

Moreover, if your family remains in your native country and does not come with you to Denmark, you are entitled to allowances for double housekeeping. Denmark also has agreements with some countries to avoid double taxation. If certain conditions are met, foreign employees from an EU/EEA country who are covered by their home country’s social security system do not need to pay social security contributions in Denmark.

However, anyone eligible for the 25% scheme loses their right to an allowance on income tax as well as a personal allowance. On top of the 25% tax, participants on this scheme must also pay additional contributions to pension schemes.

Annual tax statement

SKAT will send you your annual tax statement and an information card in the first third of the calendar year. You will not have to do anything unless you need toreport something, or if you are sent a tax return form. If you are entitled to a tax refund the money will be paid into your NemKonto Easy Account.

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